Good afternoon, ladies and gentlemen, welcome to Eni's 2019 first quarter results conference call hosted by Massimo Mondazzi, Chief Financial Officer. For the duration of the call, you will be in listen-only mode. At the end of the call, you will have the opportunity to ask questions by pressing star and one on your touchtone telephone. I will now hand you over to your host to begin today's conference.
Good afternoon, and welcome to Eni first quarter 2019 presentation. In the first quarter, upstream and gas and power sectors delivered positive results. While downstream confirmed its resilience in a tough scenario. In upstream, the EBIT performance was robust at EUR 2.3 billion, plus 25% year-on-year net of Norway impact, thanks to the higher value on new production. Production was 1,832,000 BOE per day, 1.3% lower than last year when Intisar production in Libya was still on stream. In exploration, we confirmed our positive track record with 174 million BOE of new discoveries, mainly related to the Agogo oil field in Block 15/06 in Angola, Merakes East in Indonesia, and Nour in Egypt. In addition, we are continuing to reload our exploration opportunities with more than 23,000 sq km of net acreage added in the quarter.
In midstream, we recorded around EUR 320 million of EBIT, thanks to a strong performance in gas and power with EBIT of more than EUR 370 million due to the performance improvement in both midstream and retail. Refining and marketing results were close to breakeven as marketing subsidized the refining segment, which was affected by tight differentials between heavy and tight crudes that made it convenient for us to concentrate maintenance in our plants this quarter. Chemicals recorded a negative EBIT due to the Priolo upset that altered the plan for most of the quarter. Cash flow before working capital applying the new IFRS 16 was EUR 3.4 billion, or excluding IFRS 16, EUR 3.2 billion, at the same level of last year, covering 1.7 times the EUR 1.9 billion CapEx. CapEx guidance is confirmed at EUR 8 billion this year.
Leverage was around 16% before applying IFRS 16, the same level of the end of last year. Now a closer look to upstream. On production, we reported a lower volume versus last year. The production was affected by the termination of the Intisar contract in Libya at the end of the second quarter 2018. Excluding that event, production performance was robust, delivering 200,000 BOE per day of ramp-ups, mainly Zohr, which counterbalanced almost completely Intisar and the natural depletion. In terms of result, upstream EBIT excluding Vår Energi contribution, now equity accounted, was EUR 2.3 billion, a 25% increase on a like-for-like basis versus last year, boosted by the increasing quality of our production mix for around EUR 220 million, lower cost and exploration activity for EUR 150 million, and the marginal impact from IFRS 16 principle of around EUR 50 million. Talking about our production mix, few words on the gas component.
Notwithstanding the lower prices in European and Asian hubs, we have been able to increase our realization price by 25% from $4.5 to $5.6 per million BTU, a level that we are expecting to maintain also in the coming quarters. Now let's go deeper into the progress of 2019 production. The next quarter production will be around 1% lower than the first quarter, mainly due to the planned maintenance activity in Kazakhstan, Norway, and U.K. In the second half, we anticipate a strong production growth as a result of the following additional contributions. More than 40,000 BOE per day from the startups of Berkine in Algeria, Area 1 in Mexico, Baltim Southwest in Egypt, and Trestakk in Norway. Around 80,000 BOE per day, mainly related to ramp up around the 45 and higher contribution from Kazakhstan, Norway, Iraq, Nigeria, and U.S.
Our yearly guidance of around 1.88 million barrels is confirmed. To conclude the upstream section, let me update you on the discounted net cash flow of proved reserves, a metric that confirms the quality of our upstream portfolio. In unitary terms, with $9.2 per barrel of discounted net cash flow, we confirm our top ranking. This is due to the low level of unitary production and development cost, top of the rank at $17.6 per BOE, thanks to the quality of our conventional asset mainly inherited from exploration successes. To the outstanding unit selling price of $44.9 per barrel at the top end of the range, notwithstanding one of the highest exposure to gas in terms of P1 reserves. With around 70% of our gas sold to domestic markets. Now let's move to mid and downstream. Gas and power EBIT was strong, in excess of EUR 370 million.
This result was driven by gas and LNG marketing and power business, with EUR 226 million of contribution, thanks to the improved result both in trading activity, but mainly in the gas business, where we were able to extract value from the flexibility of our portfolio of gas contracts in a scenario of positive spreads between the European hubs. These positive performances more than offset the lower contribution of the power business and the LNG, which result was extraordinary in the first quarter of 2018. Gas and power retail delivered a result of EUR 146 million, a 3.5% increase versus last year, or 10% excluding the effect of mild weather of this quarter. This quarter result, typically the highest quarter of the year, strengthened our full-year gas and power guidance of around EUR 500 million. Refining and marketing was at break even.
Due to the recent appreciation in heavy and high sulfur crudes, driven by geopolitical issues and OPEC cuts, we decided to concentrate maintenance of Sannazzaro and Livorno refineries this quarter. Consequently, refining results were negatively affected by a lower utilization rate, -11 percentage point year-on-year. The restart of the EST plan and the completion of the maintenance activity will now allow us to capture the full benefit of the IMO expected in the second part of this year. The startup of Gela bioplant in the coming months will further enhance the result of our refining activities. The robust performance in marketing almost compensated the refining temporary weakness. Finally, Versalis was impacted by the fire in Priolo plant that halted production for more than two months, and has now restarted. This had an EBIT impact of around EUR 70 million in the quarter.
CapEx are in line with the guidance. In the first quarter, we spent EUR 1.9 billion, which 85% devoted to the upstream, mainly for the development of our projects pipeline that are on track and within budget to deliver the planned production growth. R&M and Versalis spent 11%, mostly for the completion of the green refinery in Gela and the restart of EST plant in Sannazzaro. As in the past, we remain fully committed to maintain our disciplined approach to investment. Cash flow from operation before working capital and before the implementation of IFRS 16 was EUR 3.2 billion, in line with the last year results. The working capital cash absorption of EUR 1.3 billion, or EUR 1 billion net of the settlement of a U.S. arbitration, is mainly due to seasonal draw from gas and power, and is expected to be largely reabsorbed by the end of this year.
During the quarter, we generated a free cash flow before working capital changes of EUR 1.3 billion, well in excess of the pro rata quarterly need of our dividend. Cash flow from operation and free cash flow are in line with our yearly expectations. EBIT adjusted at EUR 2.4 billion confirmed the same performances of last year, notwithstanding the deconsolidation of Norway and the net negative impact of around EUR 190 million of unrealized profit in stock, mainly related to oil not yet sold to the final market at the end of this quarter, partially offset by the benefit of the IFRS 16. Net of these impacts, we recorded a growth of EBIT by 17%. The net income of around EUR 1 billion was marginally impacted by the IFRS 16 application, more or less EUR 30 million. Leverage ante IFRS was 16%. Thank you very much.
Now, together with my colleagues, I'm ready to answer any question you may have.
Ladies and gentlemen, we will now begin the question and answer session. One moment for the first question, please. The first question is from Oswald Clint with Bernstein. Please go ahead.
Massimo, thank you very much. Good afternoon. A couple of questions. The first on the gas realization, you mentioned that they're at $5.6. I think I have to go back pre-2014 to see your gas prices at that magnitude. You mentioned it's sustainable for the next couple of quarters, but I just wanted to look a little bit longer term into 2020, 2021, especially as you ramp up more gas fields in Algeria and Egypt and Indonesia. Is that level of gas price sustainable over a multiyear period? Is my first question. The second question, more short term on the gas and power results here this quarter. You said it's not LNG, it's not power, it's more trading. I wonder if you could just explain exactly what you mean by extracting value here by kind of trading around the European continent.
Could you give us a bit more clarity around what that trading strategy is, please? If it's obviously sustainable, please. Thank you very much.
Clint, I'll give you the answer to your first question. Then I'll leave Cristian answering your second one. In term of gas prices, the answer is yes, we believe that this level of gas prices are sustainable for some reason. First of all, the hub at which we are exposed the most is the PSV, the Italian hub. The average gas prices that I mentioned is being got in an environment that is the first quarter 2019 environment with a price of EUR 222. Even less than what we projected. Still, we project for the entire year, that is in the range of EUR 216. This is a confirmation that this level can be really achieved. As far as the production that is elsewhere, not exposed to the PSV, for example, the Egyptian or the Indonesian. The Egyptian, yes.
Maybe you may recall that we do not disclose entirely the gas formula as far as Zohr, you know that it has been said that the formula is not completely linked to the oil. First of all, it is a formula that is some way linked to oil. Second, means that today, with such an oil environment, maybe the price could be even a bit higher. The price is not an entire flexibility to the oil price. The price has been, in first quarter, exactly the same that has been in the fourth quarter 2018, more or less stable.
Indonesia is more or less related to the Far East LNG hubs. It will depend on the price that today is a little bit depressed but are part of the overall number that I gave you, and we expect that could recover in the near future. The answer is yes, we believe that can be sustained, and if we see correctly, a slight increase in the PSV price all along the nine months before year end, you could see even a slight increase on that number. I leave the floor to Cristian for the second answer.
Yes, good afternoon. On the first quarter result of gas and power 2019, we have to acknowledge that the market environment was fairly different from last year first quarter, because last year first quarter, there was a bullish tightening market, especially on the LNG, which allowed us to monetize our flexibilities of LNG portfolio, whereby this year, the LNG has been pretty weak on the first quarter. To the other extent, the volatility of the scenario, especially the price scenario, has been fairly strong. We were able to take advantage of the optionality which are embedded in our European gas portfolio, in order to take advantage of that volatility, in order to capture all the optionality which were part of the asset base. Going forward, clearly, difficult to project a volatility evolution. Surely, we see a price environment which is fairly weak.
We think that most of the value has been accrued already in this first quarter. We don't see now reasons to change our guidance.
Okay, perfect. Thank you.
The next question is from Irene Himona from Société Générale. Please go ahead.
Thank you. Good afternoon, Massimo. I had two questions on refining and marketing. Firstly, in the recent strategy presentation, you guided to 2019 EBIT of EUR 700 million, including Abu Dhabi. Is it possible to give us some guidance excluding ADCO, now that Q1 results are in? Secondly, again, excluding ADNOC, what is the targeted 2019 refining break-even margin, please? Finally, in Q1, what was the marketing EBIT? Thank you.
Irene, good afternoon. Your first question, the R&M expected EBIT of EUR 700, excluding ADNOC, as far as 2019, the contribution of ADNOC is really minor. I would say just very few tens of EUR million, could be in the range of EUR 650, the expectation. Maybe I leave the floor to Giuseppe Ricci to give you the answer to the other questions.
The EBIT of refining and marketing, excluding ADNOC, is more or less two-third about the marketing and one-third about the refining. Our forecast is EUR 430 for the marketing and EUR 220 for the refining. With a break-even margin that should be around EUR 3.5 per barrel at the end of the period, with all the plant in operations.
Yes, Irene The breakeven was EUR 3, you remember at the end of 2019. Now we are saying EUR 3.5, take in consideration also that the Bayernoil refinery that we partially own will be not in production all along 2019. That's the partial reason to increase our breakeven from three to EUR 3.5. As far as the medium term, our expectation remain the one that we mentioned. A bit lower than EUR 3, including ADNOC, when ADNOC will be fully, let's say, consolidated in our numbers. The number that will be in the range of EUR 1.5, EUR 1.7, around 2022, 2023, when the upgrade and the existing asset in ADNOC will be completed.
Thank you.
The next question is from Alessandro Pozzi with Mediobanca. Please go ahead.
Good afternoon. I have two questions. The first one is on the U.S. settlement. I was wondering if potentially we should see a positive impact filtering through the income statement, going forward. Also, on the cash flow, I believe there is a quite large dividend received from equity investment. I was wondering if you can perhaps give us a bit more color and how we should expect a dividend from equity investments going forward throughout the year. Finally, perhaps you can give us an update on what you see net debt at year-end, let's say pre IFRS 16. Thank you.
As far as the U.S. settlement, we mentioned sometimes before that U.S. settlement is related to some liquefaction capacity, a long-term contract that we had in the Gulf of Mexico, that has been for a long time under negotiation. We ended up with an arbitration. The arbitration is causing now the payment of more or less EUR 300 million. We accrued more than that in our balance sheet, and the number has been released in our net income at the end of last year. No more effect, and the settlement now is definitive. In terms of cash flow, the equity investment, in terms of dividend, obviously this year, the most important contributor is Vår Energi, while in the future, ADNOC will take a significant part to this. The third question was about?
Net-
Net debt. You mentioned, Alessandro, net debt before the IFRS 16?
Yeah.
Okay.
Year end, just for-
Okay. More or less in line with what we projected presenting our strategy presentation. More or less 0.2, 0.21, including-
Okay.
definitely the payment of more than EUR 3 billion to acquire 30% stake in ADNOC refinery.
Okay. Going back to the dividend received, it's going to be lumpy over the next few quarters?
The dividend from Vår Energi this year will be divided in two quarter, first quarter and the second quarter. As far as ADNOC, there will be an interim based on the semester result, the second tranche, I would say as the financial statement will be approved, so around March, April.
Thank you.
Every year, obviously.
Thank you very much.
The next question is from Peter Low with Redburn. Please go ahead.
Hi. Thanks for taking my questions. The first one was, you reiterated 2019 production guidance at $62 a barrel. Can you give us any indication of the potential PSA impact on that, should prices remain around current levels? The second was just a follow-up on R&M, and sorry if I missed this answer earlier. It is on that target for EUR 0.7 billion of EBIT this year. Given the first quarter result and the current margin environment, do you still think you can reach that level, or should we now assume that that comes in below that level? Thanks.
Okay. As far as the sensitivity to the oil price, the amount is very small. 500 of barrel, each dollar. Quite limited. 500 each dollar. As far as the expected result from refining and marketing, I would say yes. Based on our forecast, we confirm the EUR 0.7 billion as an EBIT for 2019. Assuming SERM, our scenario margin of five. We still expect a recovery of this margin in the remaining nine months, as in the first quarter, the margin has been 3.4.
That is great. Thank you very much. Any other question? Hello? Hello?
Sorry, this is the operator. May I take the next question?
Yes, we are ready. please go ahead.
Thank you. The next question is from Henry Tarr with Berenberg. Please go ahead.
Hi there. Thanks for taking my questions. Just a couple, one on the production outlook, just near term for Q2. Obviously, we've got the Kashagan outage, and I think it's maintenance at Goliat as well. If you could also just give a quick update on current activity, in Libya, and Venezuela, that would be great. Thank you.
I'll leave the floor to Alessandro to answer your question about the maintenance in second quarter and then Antonio to elaborate a little bit on Venezuela and Libya.
Okay. In second quarter, we have some major turnaround that are involving Kazakhstan with the Kashagan field, Goliat in Norway, and also Ekofisk in Norway, Liverpool Bay in the U.K., and Balder in the U.K. Those are the major turnaround of second quarter.
We expect a production reduction more or less of 60,000 barrels per day.
Okay. Concerning the actual situation in Libya, until now our operation are stable. We are making all the normal activity to keep our rates, and we are keeping 280,000 barrels equity until the mid of this year, when we have some maintenance on the second half. We are keeping a year rate 275,000 barrels per day. Situation is under control as of today. The activity is remaining, and crew change are in normal operation. Concerning Venezuela, the situation in country is unstable. Our production in Perla, it's moving between 300 to 500 million scf a day. It's not stable upon the request of the local market. Nothing to mention on the efficiency of the plant. Everything is moving quite well. Thank you.
Okay. That's great. Just to confirm, the expected impact of maintenance on 2Q, as you see it today, is about 60,000 barrels a day?
Yes, correct.
Okay. Thank you very much.
The next question is from Biraj Borkhataria with Royal Bank of Canada. Please go ahead.
Hi, thanks for taking my questions. Just one on the upstream. It looks like your production guidance is quite heavily weighted towards the second half of the year. Could you just talk about how much contingency you have in that 2.5% growth guidance? Also, just to follow on on Henry's question, what is the base case assumption for Libya and Venezuela embedded into your guidance for this year? Then the second question, in the downstream, you mentioned that you brought forward some maintenance in the first quarter. Could you talk about whether there's any significant maintenance in R&M or chemicals for the rest of 2019? Thank you.
Okay, Alessandro, to answer your first question, then Pino and Daniele about chemical, the second one.
Okay. In terms of contingency for 2019, we are carrying around 37,000 barrels per day of contingency in equity. The other question was for Pino, I believe.
About maintenance in refinery and chemical.
Because of the low margin in the first quarter, we decided to anticipate Sannazzaro and Livorno maintenance in the first quarter. For the rest of the year, we only have a maintenance of FCC in Milazzo refinery.
On the chemical-
That's great.
I'm sorry. Sorry. On the chemical side, we have a maintenance shutdown planned for the site of Priolo in the second part of the year, which we are repositioning at the moment and trying to rephase as much as we can to recover some of the issue we had at the beginning, the first quarter.
That's great. Just to follow up on the upstream question, could you tell me what your embedded assumption is for Libya and Venezuela in the 2019 guidance?
In our 1,000,088, more or less, the expected production from Venezuela is in the range of 50,000 barrel per day.
A bit less than plateau, 5,000 less than plateau, and more or less in line with the production we got in 2018. From Libya, the expected production on average is more or less 270,000 BOE per day. A bit less than the production we got in the first quarter.
That's very helpful. Thank you very much.
The next question is from Michele Della Vigna with Goldman Sachs. Please go ahead.
Massimo, thank you for the presentation. I have two quick questions, if I may. The first one is whether you target to close the farm out in Mexico Area 1 this year, and how much you expect in total from disposals for 2019? Secondly, whether you could give us guidance on DD&A for this year, including IFRS 16. Thank you.
In terms of disposal, yes, we believe we can cash in the dilution in Mexico. We expect something in the range of EUR 300 million, all in all, including some other minor disposals. The second question, for the DD&A, we expect a level in the range of $11 per barrel in 2019. That more or less is in line with the previous year, we do not expect a significant effect caused by the implementation of the new accounting principle.
Thank you.
The next question is from Bertrand Hodée with Kepler Cheuvreux. Please go ahead.
Yes, hello, everyone. Thank you for taking my question, too, if I may. The first one, coming back on the dividends from Vår Energi. You cashed in some EUR 600 million in Q1. Massimo, you hinted that you will receive another payment in Q2. Can you quantify it? Will it be around the same amount? The second question, it is related to European gas price and LNG. You made a scenario, in 2019 with EUR 8 plus NBP U.K. gas prices. We are way below that. Can you give us a sensitivity to your cash flow for a EUR 1 per MCF change in European gas price?
If I can reformulate the other way around, when you are giving sensitivity to your cash flow for a Brent move, you assume that Brent and natural gas price are moving in the same direction, which is clearly not the case since the beginning of the year, and which could be sustained, especially if the LNG market continue to be in oversupply as it is today. Thank you for your answers, Massimo.
In term of dividend that we are going to receive from Vår Energi in the second quarter, yes, the amount will be in line with what we got in the first quarter. Talking about the gas price, you know that our exposure to the NBP is very limited. Our gas production in U.K. is very limited, and we don't have other production related to the NBP. As I said before, the most important hub of reference for us is PSV, that some way is linked to the TTF. I would say, it was what I just said. The level of gas prices we got in the first quarter are the one that are related to EUR 220 per thousand standard cubic meter, in term of PSV, and more or less EUR 20, EUR 23 less in term of TTF.
More or less, we have something in the range of 15 billion-17 billion standard cubic meter of equity gas exposed to the European hubs. More or less, any EUR 10 per thousand standard cubic meter will represent something in the range of EUR 150 million of revenues before taxes and whatever. Something that definitely cannot jeopardize our cash flow looking forward.
Okay. Thank you.
The next question is from Christopher Copeland with Bank of America. Please go ahead.
Thank you very much for taking my questions. I've got one left, I think. It's going back to the same old topic of Vår Energi. You mentioned the dividend payment, very helpful to know Q1 and Q2 dividends coming through. What can you say about dividend payments beyond 2019? It looks to me that the total EUR 1.7 billion payment
From Vår Energi is a bit of a special. Anything you can say in terms of how the progress has been since demerging the company, and how its financial performance is making you feel about the dividend potential coming back to Eni in the next few years? Thank you.
You're right. The dividend we're going to receive, all in all in 2019, is something special. I don't have numbers to share with you as far as the future dividends. It will depend on the scenario, whatever. The logic, the rationale, we agreed together with our partners, is to distribute all the spare cash after the development cost. That, in the next two, three years, will be anyway remarkable as the Balder project and our Catcher project will enter into the development phase. The idea, anyway, is to distribute all the spare cash after the coverage of CapEx and definitely the dividend. Sorry, the CapEx. Hello? Hello?
I think I got the answer. Thank you very much.
Okay.
The next question is from Thomas Adolff with Credit Suisse. Please go ahead.
Good afternoon. A few questions from me. Just going back to the contingency buffer in upstream. You've mentioned 37 KBD, and I wondered, as far as 1Q is concerned, are we in the plus or are we in the minus? Are we running better than expected or we're actually running slightly worse than expected, and the reasons around that. Secondly, the refinery margin in the first quarter was $3.4 per barrel. Perhaps you can share with us what the March and April level was for the SUM. Finally, just on Norway, going back to Norway. When I look at net income from investments in the fourth quarter and compare that to the first quarter 2019, when Var was included, I wondered how much Var contributed below the line for 1Q. Thank you.
Okay. In terms of production contingency, Alessandro?
In terms of first quarter results, in terms of contingency, we are a bit less than what we were expecting, to say around 8,000 barrels per day.
In terms of refining margin, the current level is close to four, in terms of Var contribution below the line, the first quarter has been in the range of EUR 35 million.
Right. Thank you very much.
The next question is from Massimo Bonisoli with Equita. Please go ahead.
Good afternoon. Three question left, very quick. The first on production, if you have any reference on production exit rate for 2019, just for modeling purposes. The second on Versalis, will you have additional costs from the fire in Priolo over the rest of the year? The third, any changes on the tax rate guidance following first quarter, very low tax rate in upstream and the consolidation of Vår Energi?
Okay. In term of tax rate, definitely the 54 point something tax rate we got in the first quarter has been positively affected by the Norway consolidation, Norway's 78% tax rate. We believe that, assuming the level of Brent that we are assuming for the full year 2019, $62, the tax rate we expect this year will be in the range of 57%-58%, more or less in line with the guidance that we gave, a $60 Brent, more or less 60% in term of tax rate. In term of production, Alessandro?
Okay, in terms of exit rate, we do expect a fourth quarter in an average of 1,985 thousand barrels per day.
In terms of cost, as far as the Priolo fire, I said that the cost in the first quarter has been 70 million EUR on the full year. As we have the business interruption insurance coverage for that plant, we expect as a net cost, something less than 70 million EUR. Could be in the range of 50 million EUR.
Thank you.
The next question is from Jon Rigby with UBS. Please go ahead.
Thank you. Hi, Massimo. A few things. One, I just want to return to the answer you gave on tax. Just to understand what drives the increase from 1Q across the rest of the year in terms of the tax rate you were quoting, particularly, I guess, in the upstream. The second question is on the downstream. Are you able to give some kind of indication of the contribution that the EST unit provides to the downstream when it's running, let's say, at your assumed, get some idea about what the delta is once that starts up again. The last question is on LNG. In terms of the contribution, the gas and power business, can you characterize what's driving that and how you're splitting the contribution between the upstream and the midstream?
The reason I ask is very clearly spot LNG prices were very low in the first quarter, they may continue to be low for the rest of this year, but contract LNG prices are likely to rise again. Just with the lag to the oil price. I'm just interested to understand the dynamic and how the interaction works between the upstream and the midstream. Thank you.
As far as the tax rate, Jon, the difference between this 54.4 and the 57 that we expect all along this year is, I would say, rounding. There is a different, maybe contribution, different upstream countries that could modify a little bit the average, but we are talking about a number that will be in that range. The contribution is coming from so many countries and the composition of portfolio in term of production could change a little bit. That's the reason why we could have very few percentage point of difference between the quarter and the full year. I leave the floor to Giuseppe Ricci to talk about EST and then LNG, Cristian.
The contribution at regime of EST is in the range of EUR 120 million per year in term of EBITDA, after the situation, the condition of budget. Could be increased or decreased depending to the spread diesel gasoil fuel oil.
The next question is from Martijn Rats with Morgan Stanley. Please go ahead.
No, sorry. We are still answering the previous questions.
Okay.
Okay. Please, Cristian, go ahead.
Yeah. Hello. If I understood well, you want to understand better the revenue profile between upstream and midstream as far as LNG is concerned.
Yes.
Yeah. On the upstream side, basically the revenue profile is indexed to oil. Okay? The upstream part is indexed to oil, whereby, the midstream bit is taking a responsibility to manage the swing between oil and the market. On that part, you have to understand a big part, a big chunk of our sales strategy is actually hedged vis-a-vis the buying, let's say, exposure. There is just a limited amount of LNG, let's say, portfolio, which is exposed to the spot prices. I hope this answer your question.
Hello?
Hi, I lost that answer. Maybe it's better I follow up later.
Okay. Thank you.
Yeah.
Any additional questions?
The next question is from Martijn Rats with Morgan Stanley. Please go ahead.
Hi. Hello, I had two. First of all, I wanted to ask about balance sheet gearing. Given the new sort of order of magnitude that this is in post IFRS. Once the ADNOC acquisition is complete, where do you see this number going? From there, is there a specific sort of de-gearing target? Is there a sort of an objective where ultimately you'd like balance sheet gearing to be both the IFRS adjustment? Secondly, I wanted to ask about LNG. I was wondering if Eni is interested in participating in some of the Qatari LNG expansion projects, and if so, how you would trade those off against opportunities that you also have in Mozambique?
Martijn, in term of gearing, we don't have a precise gearing guidance, we have a leverage guidance. No target on this respect. In term of number, including the ADNOC acquisition, that could be, I would say, what we expect, considering everything, so our scenario and so on, and the new IFRS, we expect a gearing that will be in the range of 24%.
Okay. Thank you.
Okay.
On Qatar?
In terms of Qatar, I'll leave the floor to Antonio.
We are confirming our interest in the tender for Qatar LNG expansion project. We are waiting that Qatar is coming out with a formal bidding round. No other information at the moment.
Okay, thank you.
The last question is from Lucas Herrmann with Deutsche Bank. Please go ahead.
Gentlemen, good afternoon. You are very fortunate, my questions have all been answered. Thank you very much.
Any additional question?
Mr. Mondazzi, that was the final question. I will turn the conference back to you, sir, for any additional comments.
Okay. Just to say thank you very much for attending this call. I'll see you soon. Bye-bye.
Ladies and gentlemen, the conference is now over and you may disconnect your telephones. Thank you.