Good afternoon, ladies and gentlemen, and welcome to Ennis 2012 First Quarter Results Conference Call, offered by Alessandro Bernini, Chief Financial Officer. For 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 Joce to begin today's conference call. Thank you.
Good afternoon, ladies and gentlemen, and welcome to our Q1 results conference call. Before I take you through the financial results, let me give you a summary of the main highlights of the quarter. In E and P, we are continuing to strengthen our long term growth prospects. Our exploration continues to deliver exceptional results. In the 1st 3 months of the year, we added around $1,000,000,000 BOE of new exploration resources through Mamba Nord 1 in Mozambique, Havis in the Barents Sea, which together with the Skruggard has recoverable resources of 500,000,000 of barrels and other discoveries improving or near field areas.
Meanwhile, you will have seen that we have signed a strategic agreement with Rosneft to gain access to very promising exploration licenses in the Barents Sea and in the Black Sea, increasing the potential of our portfolio and providing support to long term growth prospects. In Gas and Power, in March, we completed the renegotiation of our gas supply contracts with Gazprom. The recognition of the associated economic effects was retroactive to the beginning of 2011 and is included in our Q1 marketing results. Finally, we are progressing on our strategic objective of unlocking value from our non core listed assets. Regarding Galp, on March 29, we signed an agreement to sell 5% of the company to Amorim for EUR 14.25 share.
Once this sale is completed, we will have significant optionality on the disposal of our stake. With regard to Snam, I would like to remind you that the Italian government has passed legislation envisaging the completion of our exit by September 2013. The method by which the separation will occur will be defined by a government decree to be issued at the latest by the end of May. Turning now to our results. In the Q1 of 2012, the market environment was broadly positive.
This was mainly driven by the Brent price, which averaged $118 a barrel, up 13% compared to the Q1 of 2011. The euro dollar exchange rate was also supported at $1.31 per euro with an appreciation of the dollar of 4.1%. However, the European refining margin Brent Ural was $3.3 a barrel in line with the Q1 of last year. In the Q1 of 2012, adjusted operating profit was €6,450,000,000 up 26.5 percent from the Q1 of 2011. This was due to the better operating performance reported by the exploration and production division up 24% and to the increase the results of the Gas and Power division up 57% driven by stronger profits from the marketing segment.
This was partially offset by weaker results in R and M and Chemicals. In the Q1 of 2012, adjusted net profit was €2,480,000,000 up 13% compared with a year ago as a result of better operating performance. This positive effect was partially offset by higher financial charges, which increased by €207,000,000 and a higher consolidated tax rate, up approximately 6 percentage points. The fiscal impact was the result of a higher tax rate in E and P and to the revision of the so called robbing tax enacted in August 2011. Looking in more detail at exploration and production, In the Q1 of 2012, Enu reported liquids and gas production of 1,000,000 674,000 barrels of oil equivalent per day, representing a small decrease from the Q1 of 2011, down by 10,000 BOE per day or 0.6%.
Excluding price effects, which reduced Q1 production by 14,000 barrels of oil equivalent per day compared to the year end year earlier quarter, the production of the Q1 was marginally higher, up by 0.2%, driven by the ongoing recovery in Libyan production and the startup ramp up of new fields in Australia, Egypt and the United States. These positives offset negatives from the sale of minor assets and some minor unplanned production losses. The exploration production division reported an adjusted operating profit of €5,100,000,000 increasing by €180,000,000 or 24 percent on the back of stronger oil and gas prices and the recovery in Libyan activities. In Gas and Power, overall volumes sold including consolidated and associated companies fell by 5.4 percent to 29.9 Bcm. Decline is mainly due to weak demand and higher competitive pressure in Europe.
In Italy, overall sales rose by 1.4% with higher demand from residential users and higher sales to the network balancing market more than compensating declining volumes sold to power generation and wholesalers. The Gas and Power division reported an adjusted operating profit of €1,500,000,000 increasing by €546,000,000 or 57% from the Q1 of 2011. It is worth reminding you that the Q1 marketing results reflect the benefits of the finalized renegotiation with GasLog retroactive for the whole of 2011. Gas and Power adjusted pro form a EBITDA for the Q1 of 2012 was €1,641,000,000 up by €587,000,000 or 56% compared to the same quarter of 2011. The increase is attributable to the marketing business, which more than doubled the result of the year earlier quarter.
Excluding the portion of benefits from the gas flow renegotiation associated with previous quarters, the marketing segment reported stronger results driven by improved supply costs associated with the revision of long term gas supply contracts and the recovery of Libyan imports and the stronger seasonal sales owing to the particularly cold winter. This positive was partially offset by a slowdown in demand across Italy and Europe and rising competitive pressures. The regulated businesses in Italy recorded a 4.3% increase in results, while the international transport activities reported a lower operating performance reflecting the assets divestment, which occurred at the end of 2011. In the Q1 of 20 12, the refining and marketing business reported an adjusted operating loss of €288,000,000 The deterioration compared to the Q1 of 2011 reflected the weak industry fundamentals across Europe. In addition, refining results continue to be adversely impacted by rising cost of energy utilities indexed to oil prices and shrinking price differentials between light and heavy crudes.
Our initiatives to counteract these very weak trading environment included efficiency enhancement, the optimization of supply activities and lower throughputs at the weakest refineries including temporary shutdown. As a result, the utilization index of our refineries fell to 63% compared to 82% in the Q1 of 2011. Marketing results were negatively affected by a decline in retail and wholesale demand for gasoline and gasoil, dampened by a cyclical downturn and competitive pressures, while selling margins in retail and wholesale markets were squeezed by a rapidly rising commodity cost that were only partially transferred to prices at the pump and clients. In the Q1 of 2011, the Chemical division reported substantial operating losses of minus €162,000,000 The negative performance was driven by higher costs for oil feedstock, which impacted the unit margins as product demand suffered in a recessionary environment. This was particularly true for basic chemical commodities with the benchmark crack at margin falling in negative territory.
The Engineering and Construction business reported a strong operating performance, which was up by €32,000,000 or 9.4 percent to €374,000,000 from Q1 2011. Other activities incorporated showed an aggregate loss of €127,000,000 in line with the €129,000,000 in the Q1 of 2011. Net cash generated by operating activities amounted to €4,200,000,000 Capital expenditure for the quarter has been €2,900,000,000 dollars mainly related to continued development of oil and gas reserves, the upgrading of rigs and offshore vessels belonging to Saipem and the upgrading of gas infrastructures. The group also incurred expenditures of 500,000,000 dollars related to the financing of the Neuom Belgium acquisition and joint venture projects. Net financial debts at 31st March 2012 was down by €600,000,000 from December 31, 2011, improving our leverage from $46,000,000 to $43,000,000 Thank you for your attention.
And now with my colleagues, I'll be pleased to answer to your question.
Thank you. First question comes from Mr. Tivan Jotlingam from Nomura International. Mr. Jotlingam, please.
Yeah. Good afternoon, Alessandro. Three questions, please. Firstly, just on Snam. I know we're waiting for a government decree, but I was wondering whether you had any increased visibility on when you whether you think a disposal would be for cash or whether you think a spin out is a more likely outcome?
Secondly, on Galp, sort of the second process, I guess, or second part of the process on a divestment is to sell the 18%. Again, do you have any view on timing, whether you believe those shares will be fed into the market? Or is there a strategic investor that you'll be discussing at disposal with? And then the third question just on exploration, a very exciting agreement you've made with Rosneft. I was just wondering do you have any color on the time line of workflow there When you expect to drill a first well?
And then secondly, just is there any commitment of capital as part of that deal? Thank you.
So as far as the agreement recently signed with Gaspar with Rosneft, I leave the I'll pass the table to my friend Claudio Descalci, who is with me now. But just starting to answer to your question as far as Snam and the Galp. Snam as you have already anticipated is still too early to make any assumption about how the separation will take place. And for sure it is I believe not correct to speculate about what could be the potential transaction which will be realized. But however, you know quite well that our suggestion, our strategy which of course we are suggesting supporting to the government is a strategy whereby that famous 3 pillars of our strategy must be satisfied, which means that the transaction to be realized must be satisfactory, must be good for our shareholders and the shareholders of Snam as well.
But in particular at the end of the transaction, Amy must be stronger than before, which means that any can be stronger only to the extent a cash transaction will take place. So for sure, we are supporting a strategy whereby a cash consideration will be recognized to Eni. We are discussing with the government and I can say that so far we are a little bit positive in this respect. As far as Galp, as you correctly stated after having sold the first 5% to Amorim at an agreed upon price of €14.25 per share then we will be free to sell in the market the 18% or 20 percent depending on the possibility to place also a convertible bond. As far as the type of transaction, which can be applied in order to dispose the 18%, we can either refer to, let me say, a market type of transaction, accelerated book building, private placement and OPV or we can have access also to a strategic buyer.
In this latest situation, we have still to agree the identity of the potential buyer with Amorim. But based on the approach, the unsolicited offer which we have received so far either from financial institutions and the strategic investor, I do not expect to face any major problem in finding an agreement with our former partner Amorim. So I am pretty confident that already in 2012, we will be in a position to dispose a significant stake a significant portion of our stake in Galp. Thank you.
For Russia, the agreement we signed with Rosneft is a strategic agreement that include the Russian activities and will be followed by activity and alliance also abroad outside Russia. Talking about Russia, the scope of this agreement as you know is the expiration development of 3 licenses 2 in the Barents Sea and 1 in the Black Sea. We have as a commitment to acquire seismic data 2d and 3d in the Barents Sea. And Rosneft already acquired 2 d and 3 d seismic in the Barents in the Black Sea. So in terms of commitment talking about figures, we have a strict commitment of 3 to 4 wells for an expenditure around $800,000,000 and additional 2 contingent appraisal wells in the Barents Sea for an additional €200,000,000 So that is the main commitment.
In terms of programs, now we finalize the agreements. We have to pass through the shareholder agreement and the GOA. And I think that will be done in the next 4, 5 months. And then we start immediately our activity. And we start in parallel in the Barents Sea and the Black Sea.
I think that the first wells will be drilled at the end of the full year plan, so 2014, 2015.
Could I just follow-up coming back to your statement Alessandro on GAAP? Should one see the €14.25 as a floor price for you to sell on any further stake?
Well, of course, the environment compared to the timing when we have agreed the €14.25 per share with Amorim, the environment has been a little bit changed. So I don't want to fix any floor or cap for to target as a target for our future sales. But what I can say is that for sure the present, the prevailing market prices do not meet our minimal expectations. So for sure it must be significantly higher compared to what is today the stock price of Agalp.
Very clear. Thank you very much.
Next question comes from Mr. Ian Reid from Jefferies. Mr. Reid, please.
Hi. Good morning, gentlemen. Sorry, good afternoon. Can I ask you two questions? Firstly, is it possible you can tell us in the Gas and Power division and your marketing segments the amount of the 2011 contribution which was made.
Obviously, we want to forecast the numbers going forward for the full year. So we really need to know what that element was because obviously it's not repeatable. And secondly for Claudio, is it possible you can update us on what's happening on unitization on the Mozambique blocks? And what the program is for 2012 and maybe 2013 in terms of the exploration targets, the appraisal targets, which you've got in mind following the completion of the current, I think it's called the coral well you're drilling at the moment?
Thanks. Okay.
On your first question on Gas and Power, unfortunately, we have to repeat that we can't make comment on this because it's a sensitive element of our renegotiation.
Okay. So, JMP, Mozambique. So unitization, we set up a program with Anadarko and for the unitization between the 2 joint ventures. So we start not only the discussion, but we have a program. I cannot tell you exactly now when we will finish this issue of the unitization.
I just can say that it's not a very complicated issue. We are in agreement. We already worked together in other unitization. So I think that there will be a question that will solve by the end of the year You know that the unitization pass through different gates. But we define at the very beginning and track participation that is an initial one then we start working.
So that started. That is something that we started positively with Anadarko. Then for the work program, as you said correctly, we are drilling Coral. And I think we'll get results from this well from this appraisal well at the end of May by the end of May. So that and then we continue back to back until the end of the year.
I think that we will be in the position to finalize our exploration activity by February March 2013. So that is the program. And meanwhile, we are working on also on the development program and on LNG, on infrastructure. So we are in parallel working also on the next steps.
So if you could just come back on the development program. Is are you working together with Anadarko even for development of prospects which lie entirely on Area 4? I. E. Is it going to be like one facility rather than 2 or 3?
You know that as in term of POD, you were first in the ways of the wells. And I think that the priority as we said is a unitization and a plan of development of the unitized area. So that means that we absolutely work together with Anadarko in terms of development where other facilities treat and all this kind of stuff. So we work with them. Now we got a new big discovery entirely in the area for more than 8 ECF and we are working on that.
But it's really in the early stage. And we'll see if we'll have capacity in the first development or otherwise we go ahead with an additional development. But our priority is work on the with Anadarko on the Unitez area.
Okay. Thanks for your help.
Next question comes from Mr. Clint Oswald from Sanford Bernstein. Mr. Oswald, please.
Yes. Thank you very much. A couple of questions. Just thinking about the Russian gas field that you started up recently, selling the gas to Gazprom, can I just confirm that that is the kind of regulated Russian gas price that you will be receiving or if there's any discount to that? And I note that you retain the buyback and marketing rights.
Do you expect use those rights at any stage? Or is that just a separate clause? Secondly, just wondering about your U. S. Volumes, oil and gas, seems to be a kind of a large step decrease in the U.
S. Gas production. Is that just a function of the gas price? And should we expect to see those volumes decrease further? And then just finally quickly just back on the Bering Sea, maybe a question for Claudio.
I'm just wondering, have you looked at these estimates of 36,000,000,000 barrels of oil equivalent? Are you comfortable with that resource number? Thank you.
Okay. First, you talked about the Yamal area and was the question on the gas price. As you say, the gas price come from a former for our Yamal field. So it's linked to the domestic and it's linked also to the export. And so as you know the domestic that is regulated is updated every year.
So that is as for the other gas producers in Russia. For the U. S, it's true we reduce our gas production that is not due to price. We reduced the gas production in some producing fields for maintenance program and also from some technical reasons. So our aim is to increase or restore this production in the next months and recover the U.
S. Production average rate forecast for 2012. About the resources for Rosneft, that is a preliminary figure coming from data normally 2 d data in the Barents Sea and 2 d and 3 d data new data in the block in the Black Sea. So that is we work with Rosneft. That is mainly Rosneft evaluation.
Now we are going to a new process of data acquisition. In terms of structures, volume and number of structures, I think that these figures are quite accurate from a volume point of view. Then we have to see from a petrophysical point of view thickness, net to gross and transmissibility of the system because we are talking about soy. If these figures how we can translate these figures in reserves.
That's great. Thank you very much.
Next question comes from Mr. Marc Bloomfield from Deutsche Bank. Mr. Bloomfield, please.
Good afternoon. Yes, two questions, please. Firstly, coming back gas marketing. Just wondered if you can help us to get a better sense of the sustainable profit improvement. I mean, specifically, if we set aside the debate around the retroactive element, to what extent do you think that you can enjoy kind of ongoing benefits from the reduced cost of gas and actually retain those benefits as opposed to simply passing them on to your customers when we come to the start of the next gas year?
And the second question, I just wondered if you could remind us of your exploration and appraisal activity planned for the Norwegian part of the Barents Sea and also for Indonesia for the remainder of 2012 and thinking there about the number of wells, timing, targets, etcetera? Thank you.
On your question about gas, we can today confirm our guidance for 2012 that we gave at Q4 results. And this means higher EBIT and higher EBITDA. Which are the elements supporting this that make our estimate sustainable estimate. First, we have the culture of the renegotiation that is positively impacting retroactively, but of course also in the volume that we are selling and we will continue to sell. We have the benefit of the production of Libya that is back to normal and that is something that should continue.
We have partially captured this year the negative impact of the sale of the international pipeline. On top of that, of course, we have to consider that besides these special effects, there is our underlying marketing situation. Our business will be more impacted in the remaining part of the year by the continuing increase in oil price and the reduced demand in Italy and in Europe as well. So the mechanism that we will use to protect our result is again realigning our cost of supply to the market through the renegotiation. We have a number of them in front of us, which 2 important ones this year.
So these are the key of maintaining sustainable our results at the time of continuing marketing weakness.
Okay. Exploration. So as you know Norway and Indonesia are 2 of our best hub in term of exploration potential. We forecast to drill 2 wells in Norway on new prospects. We have additional 11 prospects in Norway that we think to drill in the next 3 years.
So these years we'll explore 2 new prospects that are not very far from Skruggart. They are south of Skruggart. And for Indonesia, we start also this year. We have to appraise we have an appraisal campaign in the John Creek North East. And we also in this case, we drill in the next couple of years additional 5, 6 wells 7 wells sorry.
So in these two hubs, I think that in the next 3 years, we'll through these two hubs, we'll increase our resource base. And meanwhile, we are also developing different fields in the area where we can get the FID in the next couple of years. So it's not just exploration apps, but also very important production development and production apps.
And if I could follow on from that if I may. You talk about 11 follow on prospects in the Barents Sea. I mean can you give us any sense of the average size of those prospects perhaps relative to the size of the existing discoveries that you've made there?
Yes. I think that you know that we are in we are in Barents Sea, so we need reasonable research to drill exploration wells for future development. So we can say that we are more or less in terms of potential targets in the same size of volume of what we drilled until now. The range is between 200 €250,000,000 in terms of reserves. So that is our target in this kind of prospect.
Thank you very much.
Next question comes from Mr. Karim Rahim from Barclays. Mr. Karim, please.
Hi, good afternoon, gentlemen. Two questions, if I may. The first on the Galp and specifically, I just wanted to ask about your thoughts on the exchangeable, whether you decided if this should be mandatory or not. And any color that you could give us there, that would be appreciated. And then second on Snam, maybe you could just give us an update, Alessandro, on the discussions that you're having with the banks in terms of the bridge financing for Snam, how that's progressing?
And if there's anything that we should be aware of there? Thanks.
Well, Galpo Good morning, gentlemen. Yes. So for of course, we are studying the project including evaluating what could be the most appropriate strategies to be applied in order to monetize at least a portion of our stake. But I repeat starting from the situation whereby today the present market price do not meet our minimal expectation first. 2nd, in terms of convertible, we do not exclude the possibility to apply for a convertible to place a convertible vault.
But it's not mandatory to record to a convertible bond. It's just one of the strategies, which we can apply in monetizing our stake. But so far is not in our radar screen, the placement of a convertible with the Gulf shares. Then as far as Snam, Snam your question I can understand your question of course, but we are not the appropriate entity to who you can place your question, you can raise your question because of course we are cooperating with the Snam, but the entity, the company who is presently engaged in setting up the appropriate bridge financing is Snam itself. As you know, Mr.
Malakarne, just if I remember yesterday has already disclosed that they are working in order to get an autonomous rating very soon. And then as soon as the rating will be obtained, they will start actively in placing their debt in the market. As far as we know, as per our knowledge, since I repeat, we participate with them in the meetings with the banks, they are progressing extremely well. Of course, their reputation of the company and the solidity of their balance sheet support extremely well the possibility to obtain an appropriate bridge financing at a very interesting price very, very soon.
Great. Thank you.
Next question comes from Mr. Jason Kenney from Santander. Mr. Kenney, please. Mr.
Kenny, Jason? Mr. Jason is not available at the moment. Next question comes from Mr. D'Lavinia Michele from Goldman Sachs.
Mr. Della Vigna, please.
Hi. Thank you for the presentation. I'd like to ask 2 questions if possible. The first one, Claudio, could you update us on the Qasagand development? And what you think will be the key milestone to achieve the stable production rate of 70,000 to 80 1,000 barrels per day by the end of the year?
And the second question really is for Alessandro. In this Q1 results, the only slight disappointment was R and M and Chemicals within a very good set of results. I was wondering, now that we're about 1 month into Q2, do you see any improvement in those areas or the situation in that to remain as challenging? Thank you.
So let me start from cash again. And I think that we can give very positive news. I mean that the one of the main milestone was the look up and look up is practically finished will be complete in 90% 95% in April and the rest in May. So the cap is completely finished. We already start testing all the line with gas.
So the gas is on the R and D. We can also how practically say that the commission is going very well. So without any big issue one possible issue was the asset integrity of the package finalized in 2,008. And we can say now that there is no problem. The asset integrity test has been passed positively just last week.
So I think that is really we are in a good shape. And good shape means that to reach the commercial production of 75,000 barrels per day by December, we have to start production throughout the 1st week of November and ramp up. And all the team, all the management is really focused and following up this last step on a daily basis. And with my visit every month and my colleague that I can say every 2 weeks from 8 quarters. So there is a very full support.
So as far as refining and marketing and the petrochemical, as you correctly stated, we have experienced a quarter of quite disappointing results. But not for sure not due to our performance. The performance the industrial performance in both segments have been extremely satisfactory. Unfortunately, both of them have not been assisted by the scenario, the market scenario, which both for refining and for petrochemical, the scenario which consists predominantly in the high cost of the oil which represent the cost of the raw material for both of them have negatively more than in the past affected their results. Then what we are assisting now in particular immediately after the closing of the quarter is a sign of the first improvements both in refining margins and in the chemical market.
So all in all, we remain a little bit pessimistic for the entire 2012, but not for sure with the same magnitude that we experienced in the Q1. So the first sign of recovery, which we are looking at in particular in April, We hope that this situation will continue all over the rest of the year allowing the possibility to recover a little bit the very negative situation we have experienced in the Q1 of the year.
Great. Thank you.
Next question comes from Mr. Nitin Sharma from JPMorgan. Mr. Sharma, please.
Afternoon, gentlemen. Two questions, if I may. First, you signed an MoU with PetroChina last year. And if I'm not mistaken, the objective was to look at unconventional blocks in China of PetroChina projects in Africa. Any progress
on this front?
2nd, recent events in Argentina nationalization at all, does it have any impact on either the time line or the scale of investment plans that you have for your projects in Venezuela in terms of
your risk perception? Thank you.
Okay. So E and P both questions for E and P. Central China, I think that we are progressing. We are working. When you have to the scope of this MOU was to have an exchange of blocks data.
And when you analyze the NP data is a question evaluation test. So we are working positively. I think that I hope very soon we can find a good result rather than for them. So we are working. I remember you that we have also an MoU with Cyanotech that is more or less on the same line.
So we are working and we are working well. So we are quite confident that we can we'll have access also to the shale gas in China. For Venezuela, I really I don't think that will have any impact. Also following the press, I think that you read the declaration and the announcement of the minister and of the of PDVSA, they said that they confirmed that they don't change at all any thermostat condition of our agreement. And they did that immediately after they knew that we got from Argentina.
So that means that it's a very sensitive problem for everybody. They want to have an international company working with them. We are working quite well with them. With PDVSA, We are progressing working very well on all our projects. So I don't have any negative perception on feeling as far as Venezuela is concerned.
And Claudio, if I may just add one more. Any updates on Iraq pace of development? Iraq, yes. In Iraq, when we talk during the strategy presentation, we didn't talk a lot. We were not very happy about the slowdown and the slow past of our presidency in Iraq, especially because of bureaucracy.
In the last month, I think that is quite better. We are progressing. They approved some very important contract for us in terms of drilling and early facilities for production for oil treatment. So we are moving on. And I think that we are in position to confirm our target production target for Iraq in 2012 that considering the price effect is about 17,000, 18,000 barrels per day equity production.
Thank you.
Your next question comes from Mr. John Rigby from UBS. Mr. Rigby, please.
Yes. Hi. Two questions, please. The first, I guess, is for Alessandro. Can you explain to me how it will work once the split with Snam takes place with the debt that you have that you lend on to them?
Will you go into the markets and retire that debt? Or will you keep it? Can you make some money actually on retiring it, I guess, given where markets are? Can you just explain to me a little bit about the mechanism of that? The second is on cash again, just a follow-up on that.
Could you explain how many people or just confirm how many people you have working on there at the moment? And sort of contrast that with how many people you would normally expect to be working on an operated JV? And just maybe sort of contextualize it by where those people are likely to go and how quickly once first production is reached? Thanks.
So starting from your first question with reference to the repayment loans we have granted to Usnam. As you know, all the loans that we have released to Snam includes have a close whereby as soon as the company will not be considered a subsidiary of Eni anymore, the company has a maximum time of 6 months in order to repay entirely the existing debt. Okay. And of course, the company is actively and efficiently and positively working in order to be ready to satisfy the contractual provision. Then as soon as AEMI will have repaid back the entire amount what we will do with this amount.
For sure as a first step, we will repay those loans granted by banks, which carry the higher financial costs. And then for the rest, we will increase our liquidity. As many other energy company, oil companies, our peers group, the liquidity that they have and it is useful to have must is an amount which should be enough to cover at least 1 year of spending. Today, we have a much lower situation, but for sure as soon as we will have the cash coming from the repayment of the loans from Snam, our strategy is to increase significantly our liquidity in order to be able to face any potential change in the market even when in case of very negative when the financial market should move or can move in a very difficult situation, because we are convinced that the troubles which affected the financial market recently that the troubles are not over. We are still in a quite a difficult financial environment.
So it is better to face the future with a strong shoulder. So for sure, we will keep on board most of the cash coming from the repayment of the loan increasing the liquidity of our core.
Cash again. Now we are about considering any stuff and the right contracted stuff. We are about 2,000 people. Direct A is about between 600,700 until June, I think. June next year, I think that we'll have this we'll start mobilizing and I think in January February next years, because we have all the 2012 all the 2013 in ramp up.
So we have to leave some people of our team, overlapping with Shell and KMG people that will take over in January. Our update team of Shell and KMG is really in place for some years. So they are working with us. So we have these people. We reach production the full production in January, the ramp up and we start demobilizing in sorry, in January 2014 and we start demobilization in January 2013.
So in 1 year, we are going to demobilize all our people. We need these people, because you know that we are in a lot of different hubs in exploration and development and production starting from Mozambique, Bahrain Sea. So I think that a lot of people that now are working in cash again that will work in Russia and in Barents Sea and also somebody in Mozambique. So that are the 3 main hubs where we use our people in the future.
Okay. Okay. That's interesting. Thank you.
The last question comes from Mr. Neil Morten from Berenberg. Mr. Morten, please.
Thank you very much. Good afternoon. I had two questions on Mozambique, please. Shell were quite clear yesterday in saying that their bid for Cove was a sort of opening gambit in terms of increasing their stake in the future. You've previously said that you would like to be operator of a combined development.
I just wondered what your thoughts are of a big LNG company moving in next door. And then just secondly a clarification on that COVE deal. They recently got a ruling regarding the capital gains tax of 13%. I just wondered to your as far as you're aware, is that an ad hoc ruling with regards to COVE? Or would that also apply to ENI if you were to sell down your 70% stake in Area 4?
Thank you.
Thank you. First, talking about development, we said that we'd like to develop our sources and that is clear for our experience and for our knowledge of Africa and knowledge of the offshore. We don't mine also with Anadarko a joint operatorship and that is for the upstream. For the midstream as you know worldwide normally there is a company or joint ventures not normally a company with a where through which we develop the LNG like we did in Angola or in Nigeria or in Egypt. So that will be the way through which we are going to develop the LNG.
So I think that if Shell will be with us is welcome. We work with Shell and we start working with Shell in the LNG big project of Nigeria in 1992, so some 20 years ago. So it's a good knowledge and reputable partners that we know very well and I think that is one of the first company in LNG. So I think that is a good point for the joint venture for everybody if they join us.
On the tax?
Yes. For the taxation. No, I think that I don't think that there is a low that would be all that is ad hoc for a company. I think the deal is a deal. So I think that will be valid for everybody.
And if we are going to reduce our share, we have to pay these tax. But at the moment, as we repeated several times, now we are focused on what we have to do not on selling. We don't want to sell. We don't want to reduce our share and want to keep a strong position in Mozambique.
Great. Thank you very much.
There are no more questions. Ladies and gentlemen, the conference is