Good afternoon, ladies and gentlemen, and welcome to Eni's 2023 first half results conference call, hosted by Mr. Claudio Descalzi, Chief Executive Officer. I am now handing you over to your host to begin today's conference. Thank you.
Thank you. Welcome to the second quarter and first half of 2023 result conference call. In the first half of 2023, in the quarter, Eni has delivered excellent operating and financial result, with significant steps forward in progressing the execution of strategy across all the businesses, showing strong financial resilience. In 2023, we outperformed in term of both underlying EBIT and CFFO versus expectation, even as the scenario has weakened, we have been able to fund our CapEx, begin our share buyback alongside paying our quarterly dividend, and complete Algeria M&A and biorefinery purchase in the U.S. In this quarter, we have agreed the purchase of the remaining 64% of Novamont, a leading player in circular and sustainable bioplastics, aligned with our strategy for Versalis. Closing of the deal of this deal is expected before the year end, following antitrust authorizations.
Our acquisition of Neptune Energy, announced in June, add a portfolio of complementarity, high quality, and crucially, low emission asset that contribute toward our shift to gas. The deal is immediately accretive and has significant synergies of at least EUR 500 million, with further upside. It also add materiality to our integrated GGP activities, and it is a major step in ensuring long-term supply to our European gas customers. Completion of the deal is planned for the first quarter of 2024. Our agreement to buy additional interest in Indonesia from Chevron, announced this week, deepens our position in the region further, synergistically supporting our targeted growth in LNG in the Asia Pacific region. At the same time, we continue to rebalance our portfolio, simplifying the business and optimize our capital.
We completed the sale of a minority stake in the TransMed pipeline in January and announced the sale of mature production in Congo, with additional transitions in the coming months. During the transition, it is critical to be fast in delivering and efficient in spending. These elements are part of our strategic approach that already have had fundamental impact over the past decade. For instance, in natural resources, we have shifted E&P toward a focus on time to market and the efficient use of capital through our dual exploration model and fast-track development. The shift in profitability of GGP became evident in late 2021 as we leveraged our upstream equity position.
The Russian invasion of Ukraine accelerated accelerated the plan that was already in place with the asset positions we build, we had built, leveraging on our distinctive approach in all the countries where we operate, based on promotion of local economy and social development. This is delivering material result this year, also in the years to come. Plenitude has leveraged its large customer bases to increase renewable generating capacity by over 10 times in three years by the end of 2023, we expect to more than double this again by 2026. In a single year, we will have also double our EV charging points. In the downstream with biorefineries, we are at the center of the transition. We can capture new growth opportunities and transform traditional asset.
With the two existing refineries, Venice and Gela, and now with the Chalmette plant in Louisiana, we are a leading player in the market, focusing our product on HVO and sustainable aviation fuel for hard-to-abate transportation demand. With further plan, with further planned project at Livorno in Italy and Pengerang in Malaysia, plus additional growth options, we have good visibility on our target of over 3 million tons capacity by 2025 and over 5 million tons by 2030. With sustainable mobility, we combine biorefining with our marketing activities to provide decarbonization solution for our mobile customers. On the financial side, furthermore, the satellite structures is an organizational approach that complements our operational initiatives and respond to a unique capital requirement of our new businesses and the different drivers in their value.
Our strategic initiatives have translated into a financial, more profit, profitable and resilient company, with the capacity to invest to address the dilemma and generate the future returns to ensure that this is sustainable. If you look at our CFFO, we have grown it over time, meaning we are generating significantly more value at a given oil price than we were a decade ago. This momentum will continue across the current 4-year plan, where we see strong per share CAGR in a constant scenario. The story is similar with our return on capital employed, benefiting from a streamlined cost structure, stronger focus on investment quality, and capital productivity. We therefore expect to generate much improved average ROACE across our plan period.
Higher resulting free cash flow has meant we have significantly reduced net debt and leverage to around half of the level of a few years ago, making the company both more resilient, but also able to respond to opportunity where we see it. Finally, but crucially, the strength of our financial model and the greater diversity of strong businesses has allowed our shift to a CFFO-based distribution policy with a well-underpinned dividend and buyback that sees investor participate in the upside. 2022 and 2023 will represent significantly the best per share distribution by the company in its history. Focusing now on financials. Second quarter economic conditions were more challenging. Brent averaged under $80 per barrel, marginally lower than first quarter, and well down on 2022.
European hub nat gas was EUR 15 per million BTU, close to half of last year, 30% lower than first quarter. The SERM refining margin was around 60% less than second quarter 2022, 40% below first quarter. Considering this worse scenario in 2023 with respect to 2022, Eni has delivered strong, resilient result in the first half of the year. EBIT in the first half was EUR 8 billion, with EUR 3.4 billion in the second quarter, providing clear evidence of the business resisting a weaker macro scenario. In addition, our satellites and associates, such as Vår , Azule Energy, and ADNOC, are important contributors with around EUR 0.9 billion in adjusted profit in the first half.
Net profit before tax and CFFO over the half amounted to EUR 8.7 billion and EUR 9.5 billion respectively, with EUR 3.7 billion and EUR 4.2 billion coming in the second quarter. Leverage pre-IFRS is only marginally growing at 1% over each quarter and is now 15%. Let's move on to the business segment in more details. Upstream production averaged 1.61 million barrels per day in the quarter, up 2% year-on-year, and above our guidance of 1.6 million barrels per day, helped by growth in Mozambique and Mexico, and production recovery in Kazakhstan.
We are making good progress on our full year guidance that we confirm remains 1.63 million-1.67 million barrel per day, or around 2.5% up at the midpoint, implying, as expected, an acceleration in the second half of 2023, thanks to the new startups and ramp-ups. Above-plan volume, plus a continued focus on cost management, helped to part offset the impact of fall in the oil and natural gas prices. Pre-tax earnings were added by significant contribution from our key satellites, Vår and Azule. GGP had another excellent quarter, generating over EUR 1 billion of EBIT in second quarter and EUR 2.5 billion for the half year. This is well ahead of the first half 2022 and second quarter 2022, despite a significantly lower gas price.
Result substantially benefited from renegotiation and settlement related to prior periods. Also continued asset optimization. In response to the cut in supply from Russia, we have significantly reworked the portfolio to ensure security of supply. After such a strong first half, we are raising our GGP guidance for full-year EBIT to EUR 2.7 billion-EUR 3 billion, from the previous one that was in the range from EUR 2 billion-EUR 2.2 billion. Our traditional refining results have been impacted by the fall in the refining margin and negative crude grade differential and crack spreads not captured in the same benchmark, while utilization has also been lower. Our marketing result was good, helping sustainability and reflecting healthy demand for transportation fuels.
After closing the transaction with PBF to form our 50-50 St. Bernard joint venture in June, we expect the plant in Louisiana to make a positive contribution to sustainable mobility net income this year, well in advance of the original plan. Despite highly volatile and challenging conditions over the past two, three years, Plenitude has delivered on both its operating and financial target. This is testimony to the quality of the integrated customer-based model. With a 2.5 GW install at the half year, Plenitude is on course to have over 3 GW of renewable capacity by the end of 2023, almost 50% up year-over-year. In the semester, Plenitude generated EUR 470 million of EBITDA, well over half of the previous full year target of EUR 0.7 billion. We are now raising target to EUR 0.8 billion.
Our tax rate picked up in second quarter 2023 to 47%, mainly through mix effect and higher E&P rate that reflect the U.K. windfall tax impact and lower prices. Cash conversion was excellent, with strong CFFO able to fund most of the CapEx portfolio activity, the dividend, the buyback program of EUR 400 million, and our extra profit obligation that amounted to around EUR 400 million in the quarter. Quarterly CapEx of EUR 2.6 billion reflects work to complete the main project of the year, as we expected. In any case, we will reduce full year CapEx to below EUR 9 billion, down from the EUR 9.2 billion previously estimated and the EUR 9.5 billion initially guided, reflecting continuing optimization and efficiency work.
Business performance, CapEx efficiency, and timing flexibility provide a robust basis for our EUR 2.2 billion share buyback. In summary, second quarter 2023 was a strong quarter for Eni, one with a clear and valuable strategic transformation. The scenario was not a tailwind for us, yet we delivered one of our best-ever quarters. We have raised EBIT guidance for both GGP and Plenitude, we see underlying improvement in E&P and sustainable mobility as well. We estimate that this will amount to around EUR 2 billion of additional underlying EBIT and EUR 1.3 billion of additional underlying cash flow in 2023. Equivalent, equivalent to around 2% points on return.
At the same time, the acquisition of Neptune Energy and the continuous advance of Plenitude and sustainable mobility demonstrate our commitment to rapid, effective, and value-enhancing management of the opportunities and challenges presented by the energy trilemma. That concludes my remark. Along, along with any top manager, I welcome your questions. Thank you.
This is the conference operator. We will now begin the question-and-answer session. The first question comes from Biraj Borkhataria of RBC.
Hi, thanks for taking my questions. The first one is on your cash generation in the quarter. It looks like it was sort of supported by the various dividends from affiliates. I know you had the ADNOC dividend, and you get the Vale one regularly. Just a question on Azule. Could you quantify the dividend received from Azule and, and confirm that that's the sort of sustainable level going forward, or if that was a one-off payment there? Then the second question is on GGP. Obviously, that was the big driver of the beat this quarter. The team cited some EUR 800 million or so of renegotiations.
I just wondered if you could help me, in layman's terms, you know, understand what exactly is going on here, because that business is effectively buying gas and then selling that gas on to customers in Europe, and then GGP is making the margin in the middle. Presumably, if you, if you sign a contract with someone to buy or sell, you'd expect them to honor it, but obviously you have these regular renegotiations. You know, what exactly is going on there, and why is the other side of the party effectively paying you settlements at, at this point? Thank you.
Thank you for all the question. The first question is very, very short. Yes, Azule is a sustainable level of dividend because is a, is a growing company with a lot of assets, a lot of cash flow, returns, and potential in term of reserve and resources that we discover. Otherwise, we were not able to define this business combination. Yes, it's not one, one shot. It's a long, it's a long-term shot, Azule. We are the first company now as a business combination in Angola. Second, GGP. I just say a few, few word about GGP, then Cristian and maybe Francesco can complete. I think that we-- I, we just want to talk about our business model.
We're not just a, we're not a, you know, a company that buy gas from a third party and sell gas from a third party. That was the old model. All the work we have done in the last 10 years was to be able to stay in the along the value chain. For that reason, we put together the GGP, the gas component, with the E&P, because we source ourself. We are selling our gas, pipe, and LNG, and that is the new structure that we built in the last years. We are not in the model, we buy gas from Russia, we sell gas to something, somebody else. We are along the value chain, and that is the upside, and that is also one of the reason of the good results. N ow I give, I give the floor to Cristian to complete the answer.
Yes. So, in, you know, in specific, I mean, related to the, the, this renegotiation and contractual triggers effects, you have to bear in mind that in these long-term supply contracts, there are contractual clauses and, you know, that provides for parties to, if they cannot find a solution in terms of commercial settlement, to, you know, provide space for arbitration and eventually settlement of those legal proceedings.
Indeed, what happened actually in this quarter is that we found with some of our suppliers, a settlement of previous period, which were accrued since a few years back, or we had contractual triggers in the supply contract that allowed us to retake some of the cash flows that were actually paid to the counterparty again, back, a few years back. I think those are, if you want, specific feature of the long-term contracts that we simply, you know, managed to the benefit of our company.
Sorry, just one, one follow-up. Are you expecting, you know, are these coming up on a regular basis, or are they, but, yeah... Are there any visibility on that going forward in, in the rest of the year and into 2024? How should we think about it?
Well, look, yeah, as I told you, these are a big part of the, of the business, so I can already anticipate to you that, for example, the range in the guidance for the second quarter, for the second semester is also linked to the fact that we have still a couple of those renegotiation pending, ongoing, that we think that we are going to settle in the next six months. This will, will clearly have an impact to our results, and also that's why there is this range between EUR 2.7 billion and EUR 3 billion guidance for the end of the year.
Thank you very much.
The next question is from Oswald Clint of Bernstein.
Yes, good afternoon. Thank you. Yeah, the first question I wanted to ask about the CapEx. You know, now, second quarter, revising it back down again, probably 6% or 7%. I remember at the capital market say, you took it up 15% for the plan, obviously, the market didn't take that particularly well. Perhaps you could just talk a little bit more about what's happening here and the possibility of that continuing also into 2024, in terms of potentially being revised down, in the terms of CapEx. That's the first question. The second question, just to Claudio, around your comments there on best share distributions in the company's history last year and this year.
You know, as we look forward and, and we think about the balance sheet, 15% leverage and, you know, the potential to really push that number even lower and, and sustain this attractive distribution. What I'm thinking is here, you know, you've been buying a lot, but you haven't really been selling a lot. You, you know, you're on track to find another 700 million barrels this year. We've just seen a little deal with Congo, but what's the potential to start selling more, perhaps, you know, less accretive barrels through time? Thank you.
Okay, thank you. First of all, about CapEx, just give me the opportunity to give some our view about the CapEx, then we can go into the details. When we start the work on CapEx, and we presented to our strategy presentation, the CapEx, we were still analyzing all the embedded consequences of increasing CapEx, and finalize some project. That was a figures that represent the situation at that time, that we continue to work on. All the E&P, Guido, and the team continue, and also Pino in R&D, but that is mainly, E&P continue to work to create efficiency, to fine-tuning. It's not that we are cutting CapEx or cutting CapEx or reducing activity.
It's really inside the same project, inside the same, inside the same activity that we, they have been able, they did a really great job to work out a different profile, reducing. We passed from 9.5, and then the first revision, 9.2, and now below or around nine. Additional space for this year, I don't think so, because I think that we, we perform a very good reduction. For 2024, is something that the team is working on. We want to extract the maximum value. We want to reduce our cash neutrality. We want to grow because we are growing in production, as we demonstrated, without, but with the optimization of CapEx.
That is a continuing exercise that our people are doing on a daily basis. I'm not surprised that in an volatile situation, with inflation and volatile situation from any point of view, you can give a number, then you try to get a better number. That is our work, and that what we are continuing to do. In M&A, M&A, I said last time that it's true, we made a strategic M&A, so with a, with a sense, along our strategy in term of gas, energy security, transformation of our business. Each M&A step was really linked to a piece of our puzzle, of our strategy. You know, that we, we are falling more in organic growth than an M&A approach.
This time, we really acquired something that was really synergic and in line with our strategy and with our asset, creating a lot, a lot of value. From the sell side, what we are doing... Okay, we did, we did Congo, it's a, a small one, is the first step, but we have, as I said last time, we have other, other asset, marginal asset, tail asset, that we, we, we are in the next month ready to firm out and to sell. The M&A is continuing to be consistent with what we said during the strategy. In the four-year plan, we're going to have EUR 1 billion positive overall from our M&A activities. I don't know if Guido from one side, EMP, and Francesco from M&A want to add something.
Of the M&A, just to confirm that clearly M&A, in term of both of acquisition and disposal, is a matter of lengthy negotiation, and they occur once the window is possible, is favorable. You cannot expect a simultaneous management of the two sides of the M&A, but we can confirm that we are in a several number of processes of disposal. These are maturing. You will see how this will be material and will reduce the overall net debt and the leverage you are referring to.
That's great. Thank you very much.
Just, I mean, echoing what Claudio was saying on CapEx, a good part of the capital expenses have been already made in the first half of the year. The second half is lighter, although we, we are still continuing that work of optimization, and we are very confident to stay within the guided, if not better.
Super. Thank you. Thank you.
The next question, gentlemen, is from Alessandro Pozzi of Mediobanca.
Good afternoon. Thank you for taking my questions. I just wanted to go back to the GGP and whether you can clarify how much of the contract negotiations are embedded in the 2023 guidance. Once also you exclude that, what was the main reason for the upgrade in the guidance, if we just look at the optimization part of GGP? Also, within this theme, what we are seeing now is very wide time spreads in the future market at the present. I was wondering whether that could be an opportunity that could be monetized and can generate potentially additional EBIT for the division. That's the first question. The second question is on Indonesia. You announced a new acquisition there.
My understanding is that the consideration was rather limited, but potentially, in terms of volumes, this could be a sizable acquisition that could bring 100,000, maybe more, barrels in the next few years. I was wondering if you can give us a bit more color on the potential, on the CapEx required that you see there, and whether there are obligations as well to drill more wells there. That's all for me.
Okay, thank you. The first question is for Cristian.
Yeah. Thank you. In terms of the upgrade of the guidance, you, you can think of it by, you know, 50% of that upgrade as being triggered by these contractual, let's say, triggers and renegotiation that were actually better than expected. The other 50% instead is linked to the better, I would say, trading and optimization environment and margins. Yeah, when it comes to the time spread that you are referring to, I assume that you are referring to the fact that between winter summer and winter now there is a spread which is in the range of EUR 20 per MWh . Yes, clearly we, we are, we are working on trying to capture that, that opportunity in the market, given that the spread is surely interesting and sizable.
Clearly managing also the, the, the, the capital allocation that we do on that kind of opportunities, because you, as you can imagine, storage also, attract a lot of cash flow. Thank you.
Thank you, sir. Guido, you can answer about Indonesia, please.
Yeah, on Indonesia, clearly, it's a very synergic acquisition. We leverage on the presence of our facilities. There is a tieback. Being a tieback and being very close to our facilities, it will place the development cost per barrel to the lower, to the lower range, and we may say that we are in the one-digit region of the CapEx per barrel developed. Yeah. Maybe less.
We have also.
Perfect.
We have also to add that we have Bontang.
Yeah.
We have also Bontang.
Yeah.
That increase the value of this acquisition is not just in, in upstream acquisition, but as I said before, is really the integration, is the model. We start from the resources, we develop, we farm, we develop, and then we, we can market it. It's really a, there are a lot of upside potential in this acquisition.
Thank you. In terms of volumes, sir, can you maybe give us an indication of when it could, we, we could see the first, first gas from those developments?
It'll be beginning of 2027.
Around 100,000 gross, is that the potential-?
It'll-
-target?
It'll extend the, the plateau of, of our Jangkrik FPU, for many more years than, than, than what is, is planned now, of course.
Okay. Thank you. I'll send it back.
The next question is from Alastair Syme of Citi. Please.
Wanted to ask about Italian gas?
I'm sorry, I apologize. We cut off your first part of your question. Please repeat.
Sorry. I'll, I'll start again. I, I just wanted to ask about Italian gas demand, which, of course, you know, remains well below where it was two years ago. Can, can you give a, a picture of what you think your customers are doing, particularly on the industrial side? You know, given Italy has some big energy-intensive industries, I'm thinking things like ceramics. You know, prices are still high, but, you know, I guess a lot less higher than they were. Is there any sign that customers are thinking of picking up back on consumption? Thank you.
Look, when it comes to the industrial, let's say, behavior, as you can imagine, we have seen, starting from last summer, when the prices actually were very high, a reduction of industrial activity, mainly linked to the energy-intensive industries that either reduced the shifts or reduced the orders to be managed. The consumption was around, you know, on average, around 15% reduction, even 20%, depending on the sector-specific activity. This has been there since last summer. In the last couple of months, we have seen some timid, very timid recovery, in terms of consumption, which in turns means that there is also recovery in the industrial activity, but it's still very timid. And also bear in mind that, that some of these industries were actually reducing the impact of the gas by switching to other fuels.
Do you have a view, you know, whether any of this has been permanently taken offline? You know, like, will it all come back at the right price, do you think?
Sorry, I didn't get your question.
How much is, how much is structural?
How much is structural or if you, we can come back to the past?
Well, we we have, you know, we haven't seen the actual closures, if you intend closures. No, we haven't seen closures. We've seen, you know, reduction of activity. In principle, if the environment will, will get back, I think this, this demand could come back.
As in the past.
Okay. Great. Thank you very much for the color. Thank you.
Sorry, sir, I apologize. We have Henry Tarr from Berenberg for the next question.
Hi, thanks for taking my questions. two, please. One, just back on the GGP side again. Is Damietta a meaningful part of the GGP beat here? Then I just wondered whether you could name some of the counterparties you're renegotiating with on the supply side, or not. Then the second question, I just wonder whether you see a change to sort of downstream competitive positioning, with the power and gas prices in Europe, the way they are now. Do you think it's a kind of structural shift into higher gas and power prices in Europe, and whether that might change the strategy for Versalis and for some of your downstream business? Thank you.
No, look, the meta is clearly a crucial part of our activity, especially in the LNG, and it's an important addition to our overall energy portfolio. Clearly, it's part of our results, and the performance is clearly also part linked to the meta operations, both clearly on the plant side and also on the LNG side. In terms of the negotiation and counterparts, I mean, given that those are, you know, confidential discussion, I would rather not mention any of them.
Okay.
Okay.
Okay, about the downstream strategy, of course, we didn't change the downstream strategy that because of the cost of energy, first at all, because last year, when the cost of energy was 10 times more than the normal situation, we had been in condition to shift from gas to other energy vector, reducing dramatically the cost of gas. Now, we are maintaining more or less the same sector, but we are not in the trouble for this. Yeah, do you?
Yeah, let me make a few comments about the industrial sector, specific about chemistry. We think that over the last two years, European chemistry is driving to a high-end application because, of course, today, Europe is already facing some challenge in term of competitiveness compared to other regions, especially in North America and Asia, for the high cost of gas, or let's say, higher cost of gas. What happened over the last five years is speeding up in Europe in term of specialization of the market, and is what we announced already three years ago for Versalis, and so we are continuing our journey.
Good. Thank you.
The next question is from Henri Patricot of UBS.
Yes, hello, everyone. Thank you for the update. I have two questions, please, on some changes you made to the guidance for 2023, what are their implications for later years. We're starting with Plenitude, which you raised in slightly the EBITDA guidance. Is that particularly just delivering a little bit faster than you expected, or should we think that, you know, maybe the 2025 guidance is looking more conservative now? Similarly, for the downstream side, where you actually cut the guidance for a bit for this year, does it make the longer-term 2026 target more challenging to achieve, or is it really problem cycle specific to this year? Thank you.
Okay, Henri, regarding Plenitude guidance, this year, the, the market was stabilizing a little bit in terms of volatility and level of prices, so we have been able to being very effective in our commercial strategy and, and, and making good result on the, on the retail activity. Both in Italy and also, and also abroad in Europe, where the emergency measures taken last year to defend the, the most vulnerable client have been taken out. Now the condition in the market are a little bit better, and we can compete with other operators very well. It is a better result of this year. We maintain our, our level of result also for the next year.
About the, the guidance related to the downstream, you are referring to clearly this is impacted by more than from the nominal view value that you can see on the SERM, the margin, the margin that you calculate on the basis of benchmark, by a weakening, environment, in particular related to the crack spread, to the, differential between crudes, and also by the reduction of the gas pricing that was not, clear, didn't impact our performance, as we have already last year switched, to a different, let's say, source of energy. Therefore, that reference, has reduced, the overall, performance of the downstream, as you've seen, in this, in this quarter, but we were substantially able to compensate this effect, on a like-for-like basis, so reassuming similar level of differential, et cetera. Therefore, that is a, a confirmation of a guidance in a lower environment at the end.
Yeah. Additionally, it's important to say that in the second half, with the drop of the margin, the SERM, we performed all the maintenance in the plant, so we are ready to gain to the fact that starting from July, the spread and the crack, the crack of gasoline and gas oil are increasing a lot, and we are really in the full driving season. So we expect to have a summer quite bullish in term of margin.
That's it. Thank you.
The next question is from Irene Himona of Societe Generale.
Thank you very much. My first question is, going back to CapEx, if I may. It's quite admirable that, that you are continuing to, to optimize CapEx and to find, meaningful efficiencies, despite what is clearly a, high external inflation environment. I just wanted to ask, what average inflation rate do you see in the, let's say, the main, procurement categories in your upstream? Um, and then my second question, um, if we think about investor distribution, the balance sheet, the weakening macro, and your, uh, increasing efficiencies, I mean, if the macro were to continue to weaken into 2024, um, would you then be prepared to, to use the balance sheet for a period and re-leverage from what is a low level currently, to, to, to sustain, uh, uh, distributions even if they were above your, your targeted range of CFFO? Thank you.
Okay, thanks, thanks for the question. For the CapEx, and for the cost inflation, we have seen 10% from 2021 to 2022, and we are seeing a 7% year-on-year from 2022 to 2023 and onward, which is already factored in our CapEx guidance of the year and of the following years.
For the second question related to the distribution, clearly, as we stated in our distribution policy at the beginning of the year, and we changed it, and we gave a priority to it and to our investors. The answer is yes. We can, we don't, I don't believe in a, in, in, in a low level, for a long time in any case, because I talk about, I talk, I talk about demand, supply, and all the different dynamics, because the demand is increasing, and it's not just a question of increasing cost, but is that we need supply. I think that there is a good dynamics, but in the case, we have some bad periods, we cope with it. It's not. I think that the priority, as I said, is the remuneration and the leverage, and the debt is good.
For that reason, we try to keep this leverage very low, and that is important for us to be flexible. Flexible, meaning that we can continue to give the right level of remuneration to our investors, and have a flexibility in our business, in our CapEx, in our, in our debt, to continue and to be stable as a company and also foreseeable, and a company that don't give a surprise. The answer is yes, we can do that.
Thank you very much.
The next question is from Martijn Rats of Morgan Stanley.
Yeah. Hi, hello. Quite a few questions have already been asked, I wanted to ask you two gas-related questions. The updated guidance for GGP, the 2.7-3.0 figure, can you say a few words about how sensitive that is to TTF prices? The context is, of course, that inventory is high, and they continue to fill, and we may or may not hit full storage, and then funny things can happen to the TTF price, possibly. I was wondering how robust that guidance is, or whether it can still swing around with European gas prices.
Sort of, following up on the earlier question on the contango and the TTF curve, the EUR 20 a MWh that you mentioned, I was wondering if that now pays for floating LNG storage, given where current LNG tanker rates are. A little bit difficult to sort of figure out in a seat like ours, but you're probably a bit closer to it, so I, I wanted to ask.
Yes, thank you. The guidance is robust to the TTF flat price. I mean, we have a very, very limited exposure to the flat price this year, so this would not impact. Clearly, if you want, the impact could be on the spreads. I mean, a lower spread means lower spread, so this could be, this could have an impact, but is a different level. When it comes to the floating storage, yeah, sure. I mean, the economics today are robust for a floating storage opportunity. The fact is that, you know, given the boil off, you can, you know, say, build this activity for a range of up to one or two months maximum. Let's say, in order to take advantage of that, of that price in October, November, you will see ships floating around probably around August, September, not before.
Okay, that's useful. Thank you.
The next question is from Massimo Bonisoli of Equita.
Hello, good afternoon, thank you for taking my question. The first two question are around the Italian National Recovery and Resilience Plan. If I understood correctly, Raven, CCS project was just excluded from, from the plan. What are the implications, if any, for the project? The second question, still on the NRRP, what could be instead the support for the conversion to biorefineries, for example, for Livorno? The third question, just for our models, if you can please provide an indication on expected upstream tax rate in the second half. Thank you.
For the first, for the first two question, honestly, I don't have an answer because I, it just, it's been issued yesterday, and we don't know exactly what is inside, what is not inside, just the speculation on the newspaper. Now we are going... we have to go through. I don't consider, honestly, any, in any case, any impact, in the sense that we are going to do what is economics, what is, is, is, can create a, a profit. That is for the transition, but not on just for the transition. You know, when we talk about trilemma, we need something that must be sustainable for, for the environment, sustainable from an economic point of view, sustainable, affordable from a for the competitiveness. It's not an issue.
Clearly, if there is a support, is welcome. If there is no, like, something that we have to discover. I don't have an answer for the two, for the two points yet. Maybe we can, Francesco can, respond to the, to your point.
Si. The one related to the tax rate, it will not particularly different from what you have seen, in this quarter, so something that range between 45%-47%. That clearly will depend on the different contribution of the various businesses, and also clearly the scenario. As we were mentioning before, an improvement, for example, in refining, this will help to keep it lower and clearly even, an higher price of Brent, it will help too. So there will be a lot of moving parts, but there is a range.
Great, thank you.
The next question is from Bertrand Hodée of Kepler Cheuvreux.
Yes, hello, and thank you for taking my question. Question around GGP again. In, at, at the last capital market there, you, you guided, if we, if we exclude initial 2023, you were guiding for a recurring, I would say, GGP contribution of around EUR 600 million-EUR 700 million EBIT level. Are recent development and volatility in gas market or recent, we say portfolio actions you've, you, you've done could make you raise that guidance? Any color on that would be very helpful. Thank you.
Sure. You remember well. I mean, we were guiding last year around EUR 600-700 million for 2024-2027. You know, we have to acknowledge the fact that the market is still keeping a supporting trading environment. I would say, I mean, from the time being, I would have an upward bias, so to speak, in terms of guidance for the next year.
Maybe can I ask also a follow-up on Indonesia? I mean, those field you've been acquired, have been, you know, on the drawing board for probably 15 years and has been back and forth, delayed, and finally not launched. Now you've, you've... So you've bought those assets, you have a different plan. It will not be, I would say, a greenfield development, but more a tieback. Then you say it's gonna be, you know, fast track, and you only see the production by 2027. Can you help me reconcile those comments?
Yes, yes. We try to help you. Now, first of all, we go back to what Guido said, and what you said, 15 years. Clearly, 15 years ago, we didn't have this infrastructure that we built in, with Jangkrik . We, we can consider that kind of resources, stranded resources without infrastructure. We discovered Jangkrik and other field, other gas field. We develop our platform. We had a space in Bontang, because 20 years ago we didn't have enough space in Bontang because the gas, depleted, so less production. Now there are the conditions. The situation is not that this stranded asset or a stranded asset before, it have to be stranded asset forever, if there are different conditions. That is a point, first point. Second, Guido didn't say fast track.
They said they ask, they ask him the date, and he said 2026, 2027, and that is in the sense, the priority and the space that we find in our facilities. He said, we don't want to invest in new facility, new trains. We have facility with a lot of gas, so now we're going to develop, and then we put gas inside. I hope that I help you to reconcile the, this information .
Yes, perfect. What you implied is that, in fact, you, you don't have a lot of room on your existing Jangkrik facility yet, but it's probably in two years you will have room to have those tieback gas field being connected to.
You are correct
... facility.
You are correct.
Okay. Perfect.
Thank you.
The next question is from Kim Fustier of HSBC.
Hi. Good afternoon, all, and thank you for taking my questions. Firstly, could you comment on the recent performance at Zohr and your Egyptian gas portfolio more broadly? There are media reports of production issues at Zohr. Your Egypt gas production is down 8% year-on-year, and Egyptian LNG import exports have dried up. Any color around that would be helpful. Secondly, could you provide any updates around the Plenitude spin-off, please? Thank you.
We, we don't have issues of production in Egypt. Zohr is, is ranging between 2.2 and 2.4. We are managing the production. Clearly, there is a seasonal effect in Egypt. Summer season, the domestic demand is much, much higher than the winter demand. This is reflected in the export and of course in the domestic production.
About the spin-off, it is a partial disposal to a strategic partner of minority stake of Plenitude. We are in a well-advanced stage of negotiation. Clearly, negotiation will take time also because there are a lot of details that are to be agreed, clearly in term of value, in term of governance. I think that this is a program that is going according to the plan, and clearly we will disclose once all the details will be fixed.
That's great. Thank you.
Gentlemen, that was the final question. Would you like to make some... any closing remarks?
No, thank you. Thank you, thank you. I want to thank you everybody to attend this conference call. I think that we covered all the, the topics, so thank you, and a good vacation.
Ladies and gentlemen, thank you for participating in the Eni conference call. You may now disconnect your telephones.