Good afternoon, ladies and gentlemen, welcome to Eni's 2018 fourth quarter and full year results conference call, hosted by Mr. Claudio Descalzi, Chief Executive Officer. For the duration of the call, you will be on listen-only mode. However, 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 your conference over to your host to begin. Please go ahead, sir.
Thank you. Good afternoon, welcome to the 2018 full year results presentation. The transformation undertaken by Eni in the last years allowed us, in 2018, to further improve our results, both from an operation and financial point of view. We have been able to accelerate the implementation of our strategy, achieving remarkable milestones in terms of geographical diversification and in the rebalancing of our businesses. In terms of our priorities, in 2018, in safety, we registered a total recordable injury rate of 0.35, confirming a level that is in the lower range of the industry average. For the environment, we are strongly committed to reduce the carbon footprint of our activities. Upstream GHG intensity decreased by 6% versus 2017. In 2018, we improved our main KPIs from the upstream to the downstream sector, increasing our financial and technological efficiency, with an extensive integration of all our businesses.
The main highlights for upstream are a new record of production with 1,851,000 barrels per day, an increase of 2.5%, excluding price effect. In exploration, more than 60 million barrels of added resources at a unit exploration cost of $1.5 per barrel, which confirms our focus on exploration to guarantee organic growth, contributing to low breakeven cost. Moreover, also in 2018, we reached a very high level of all oil resources reserve replacing ratio of 124%, which was fostered by new FID taking in the period. Finally, we increased the value of each produced barrel faster than expected. In midstream, gas and power, performance was strong with an EBIT of EUR 544 million, more than twice that of 2017. This growth has been led by gas portfolio improvements, LNG, and power, and remarkable retail contribution of EUR 201 million.
Downstream performance was slowed down by the high cost of the feedstock, the exchange rate effect, and market conditions. In Refining and Marketing, we reached an EBIT of EUR 390 million for the full year. These results represent a 25% reduction versus 2017, in line with the reduction in the refining margin. In chemicals, downturn was more severe. However, despite extremely negative scenario, we reached breakeven, thus confirming the resilience of our chemical sector. From a financial point of view, we had one of our best performances of the last decades. Cash flow from operation of EUR 13.9 billion is 39% higher than last year, including the contribution of EUR 400 million from the Zohr deferred cash-in. This result, driven by our valuable and diversified portfolio, has exceeded our original 2018 guidance of EUR 13.5 billion.
The efficiency of our investments allow us to lower our full cash neutrality, that in 2018, reached $52 per barrel. As a result, we generated an organic free cash flow of EUR 6.5 billion, the highest since 2008. With a net debt of EUR 8.3 billion, leverage has dropped to 16%, the minimum in the last 12 years and one of the lowest amongst peers. Now some color on our recent activities in Middle East. The exceptional rate of growth of Eni in this region over the last years represent a strategic achievement, one which was a major target in terms of geographical diversification and more balanced portfolio. Starting from a limited presence in the area, we signed 11 contracts from the exploration to the downstream according to our model to be all along the value chain.
We entered already producing asset that had a high potential growth rate, discovered giant field to be developed, areas to be explored, and one of the largest refinery in the world. Starting from 2018, production of 40,000 barrels a day from Lower Zakum and Umm Shaif, we have added the development of Ghasha, the largest gas field in Abu Dhabi offshore. Based on this, from the second half of the next decade, we will raise our equity production to more than 180,000 barrels a day. We acquire 70,000 sq km of highly promising low risk acreage in Oman, Abu Dhabi, Saudi, and Bahrain. This is the largest acreage held by an IOC in the region. With the risk of claiming a potential of around three billion barrels of oil and gas in place, these areas will be a primary target of our exploration activity in the coming years.
This potential will be developed leveraging the existing infrastructures with an accelerated time to market and low cost. Overall, in the Gulf, we target a long-term equity production of around 100,000 barrels per day. In refining, we reached another strategic result with the acquisition of a 20% stake in Ruwais, which increases our overall refining capacity by 35%, without taking into account any further improvement resulting from the already defined expansion plan. Ruwais is one of the best refineries in the world, a unique opportunity to rebalance our business structure and improve the average profitability of our refining sector. This deal has two components. First, we enter the large flexible producing asset with an important upside potential. Second, we are establishing a trading JV with our partners to better capture the market potential in Europe, Middle East, and Far East, and Africa.
This is a significant step up in our processing capacity that will further enhance the resilience of our refining system. Through this acquisition, we will improve our average break-even margin from about $3 per barrel to around $2.7 per barrel from 2020, and to $1.5 per barrel at the completion of the upgrade project, which will increase the complex refining capacity to 1.1 million barrels per day by 2023. The new development will be entirely self-financed by the revenues of the refineries. These assets will be equity accounted and will contribute to our cash flow, thanks to an attractive dividend distribution policy. The key drivers that have characterized this impressive expansion in the region have been the deployment of our technologies and our operational model, from exploration to the refining phase. In 2018, we set a new production record.
With a production of 1,851,000 barrels, we grew by 2.5%, excluding price effect versus last year, mainly thanks to the ramp-ups of Zohr and Nooros in Egypt, of Jangkrik in Indonesia, and Kashagan in Kazakhstan. The startups from OCTP gas project in Ghana, Wafa Compression and Bahr Essalam Phase Two in Libya, and Ochigufu and Ndungu in Angola. Lower gas demand due to the geopolitical issues in Libya and Venezuela, and to commercial reasons in Ghana, has reduced our existing potential growth by about 27,000 barrels per day. The last quarter of the year was also impacted by some downtime in the U.S., Norway, and Nigeria. During the year, we more than replaced our sales base organically. Proved reserves at the year-end were 7.2 billion barrels, of which 51% is gas.
Major organic reserves were recorded in Egypt, with progress in the development of Zohr, and FID in Mexico Area 1, Merakes in Indonesia, and Angola. Including the positive contribution of portfolio, we recorded in all sources reserves replacement ratio of 124%, and around 11 years of life index. In the past five years, we have been able to organically replace 130% of our reserves. Let's now move to the upstream economic results. 2018's EBIT was EUR 10.9 billion, more than doubling last year's result, with an oil price growth in euro of just 25%. Better performance in terms of production mix and volumes contributed more than EUR 1 billion to the EBIT growth of EUR 5.7 billion. Upstream operating cash flow was EUR 12.9 billion, 55% higher than in 2017.
Our generation per barrel, thanks to an improved production mix, was $22.5 per barrel, a level that we had expected to reach at the end of the plan period. Thanks to the efficiency of our investment, which allow us to keep CapEx flat, we generated a cash flow after CapEx of EUR 6.3 billion. This excess cash fully covered more than twice our distribution needs. Midstream contributed more than EUR 900 million EBIT and around EUR 1 billion cash flow from operations. Gas and Power with EUR 544 million had its best performance since 2010, proving the competitiveness of midstream and capturing high value from energy, where we increased our contracted volumes by 70%. In particular, retail gas contributed to this result with EUR 201 million.
Thanks to greater operating efficiency, the continuous growth of the customer base, which now numbers 9.2 million clients, 6% more than last year, and thanks to an improved offer of new products. Refining and Marketing had a good performance, notwithstanding the reduction by 23% of the refining margin. EBIT was driven by an excellent marketing performance, with a result close to EUR 500 million, while the refinery system was impacted by the appreciation of sour crude due to the U.S. sanctions on Iran and the recent OPEC cut. In Versalis, where we are very close to break even, it was a difficult year due to the growth of cost of virgin naphtha by 25%, the weaker euro/dollar exchange rate, and an excess of supply in the polyolefin market due to the strong growth in Middle East and U.S. export.
In 2018, Eni improved its financial performance, reaching its best result in the last 12 years. Eni's organic cash neutrality covered all costs, CapEx, and full cash dividend at $52 per barrel, an improvement on last year's result of $57 per barrel, and on our target of $55 per barrel. Even if we exclude the deferred cash-in from Zohr disposal, our cash neutrality remained below $55 per barrel. If we do take into account the net cash flow from portfolio activity, we generated a free cash flow after portfolio and dividends of €3.8 billion, the highest since 2006. This has allowed us to lower our net debt to €8.3 billion, and to reduce the leverage to 16% and the gearing to 14%. Finally, I would like to highlight the exceptional results we have reached in the years of industry downturn.
We have been able to reshape our business quickly so that today Eni is more flexible, faster, more efficient, and more valuable, thanks to the large contribution from exploration success and the fast-track development of our discovered resources. 70% of the projects we sanctioned in the last three years came from the discovery of the last five years. By leveraging the quality of our portfolio and the low-cost development, we have increased our production by 15% while reducing overall CapEx by around 35%. The result of this is an improvement in organic cash generation and reduction in net debt. The organic free cash flow now has reached €6.5 billion, more than double of what we had in 2014 with a Brent price that was 30% higher. The net debt has dropped by 40%. Thank you. Now, together with our top management, we are ready to answer your questions.
Ladies and gentlemen, we will now begin the question and answer session. The first question is from Mr. Henry Tarr of Berenberg. Please go ahead, sir.
Hi. Thanks for taking my question. Could you potentially talk about the options on the exploration blocks, one in the U.A.E. and the Middle East? When are you hoping to start drilling activities? Perhaps if you could talk about the potential fiscal terms agreed for the blocks and how happy you are with the arrangements there. Secondly, following the investment into the refinery in the U.A.E., are you now happy with the balance of the portfolio, or do you think there's potentially more rebalancing to do as you look across the group? Thanks.
Okay, thank you. Luca, can you answer for the exploration in Middle East?
Yes. Our plan is to start exploring in Abu Dhabi offshore next year. We have a plan for start drilling in 2Q 2020, we'll follow up with a stream of exploration wells.
I think that you ask also if we are happy with the commercial contract. Clearly, we are happy, otherwise we didn't sign it. Clearly considering that it's not diluting our package of exploration initiatives. It is not diluting, in the future, our package of development. It's good conditions. Clearly, we have to be good also in exploring and find resources. For R&M, I think that now we are very focused on this. Big initiative and big acquisition we made. You know that we had plan of development already defined. By 2022, we are going to increase our capacity from 900,000 barrel to 1.1 million barrel per day. We are improvement also in Italy because we restart in Sannazzaro. Our refinery in the north of Italy, we start also Gela and also I think that it is going to be a good period for refinery.
If you ask if we are happy and now we think we are in a good balance between upstream and downstream, I think that now we improved our position. Clearly, we don't have any other things in front of us. Maybe it's something that we are going to see in an opportunistic way, but considering that we are in the biggest refinery that has a lot of possible future development, I think that we are happy with what we have now.
Great. Thanks.
The next question is from Mr. Raphael Bouteille of Bank of America, Merrill Lynch. Please go ahead, sir.
Thank you. Good afternoon. I've got a few, please. First one, just coming back to the ADNOC downstream acquisition. When that transaction closes in the third quarter this year, your leverage will likely go up by around 5% or so. Can you just illustrate what that might mean for the timing and level of additional shareholder returns over and above your current dividend strategy? Second question, just in upstream, you had a 100 million barrel write-off. Could you just give us a little bit of color around where that is and what are the assumptions underlining that reserve impairment? And then finally, jumping back to downstream, just a bit of housekeeping on the Milazzo refinery in the first quarter. Can you give us how long that refinery was out due to weather issues in the first quarter? Thank you.
About ADNOC investment in the refinery. I think the closing is expected by the third quarter. First of all, it's not impacting in our capital allocation in respect to our dividend policy or our return to investors. They are not in conflict because also with this acquisition, now our leverage will be below the 20%. From that point of view, there is no problem. Massimo, if you want answer for the
Yeah. The net write-down we made in the NP asset amounts substantially to EUR 470 million net of taxes. More or less half of this value is due to the write-down we are performing on Junín 5, our heavy oil asset in Venezuela because we have written down all the proved undeveloped reserves due to the current situation in country. We have written down also the value. The issue is related to the difficulty to operate such asset in country right now. You remember, we made a write-down of Cardon IV, the Perla field in 2017 because of, I would say, the uncertainties in country. The difficulties to inject additional money in Venezuela. Today, we are performing this write-down because of the technical issue in country.
The current production is going ahead while the development of the undeveloped resource reserves is difficult, and that's the reason why we are doing so. The rest of the write-downs relate to other assets and may relate to technical issues and a slight reduction in the scenario we are projecting looking forward. About Milazzo, really the long period of bad weather produced some problems in our south refineries, not only in Milazzo, but also in Taranto, because the bad weather was very long. This was rebalanced with the repositioning of our products coming from other depots and refinery. Especially in Milazzo, for a couple of weeks, we had to slow down some plant, but without any shutdown.
Thank you.
The next question is from Mr. Alessandro Pozzi of Mediobanca. Please go ahead, sir.
Thank you very much for taking my calls, have two. The first one is on ADNOC, the refining unit. It looks like it is going to have a meaningful contribution to your R&M division. Just wondering if you could potentially quantify for us the impact on either earnings or cash flow. The second question on the upstream gas realizations in the upstream have been again, very strong. Just wondering if you can give us a bit more color there. I was also wondering maybe if there is a lag between the oil price and gas realizations in the upstream. Thank you.
Okay. As far as the return expected from ADNOC refineries, definitely we can be deterministic on this, but some numbers has been spent even by the operator and the other partners in the initiative in the range of 10% yield from this investment. Broadly speaking, we can confirm definitely the cash flow expected from this investment will be a growing one. As Claudio said, we expect a growth in our refinery capacity up to 1.1 million. The return would be in line with this growth, with an average that will be in the range of 10% or even slightly higher than 10%. The second question?
The realization of gas.
The realization of gas has been growing in 2018. Take into consideration the increase in the gas realization prices in Europe, when we sell the Italian production and part of the Libyan production. The change of the mix in our portfolio in terms of gas is contributing to this. Among the new project, the gas project entered into production. I would like to remember Zohr and Jangkrik definitely are increasing significantly the overall realization gas price in our portfolio.
That's a lot of questions. I believe the sensitivity of cash flow to the oil price has come down a little bit. I guess that's a function of the new projects coming online.
Yes, slightly. You are right.
The next question is from Mr. Alastair Syme of Citigroup. Please go ahead, sir.
Thanks very much. Can I just ask what you think will be the sort of the key final investment decisions you take in 2019 in the upstream? My follow-up was just really on reserves. Eni has shown itself to be very different to the rest of the industry in terms of reserve replacement in recent years. At the same time, some of your peers say reserve life and reserve replacement doesn't really matter that much anymore. I would be interested in your perspective on how the strong reserve position gives you visibility on the future, or what you think of that comment.
Clearly, our position on the reserves replacement duration is quite, I don't know what they think the other, but is really one of the main priorities because our strategy is to grow organically. Our strategy is to grow organically through exploration, and be fast in developing our field. We reduce our inactive capital. We start from our exploration that is around $1 per barrel unit cost. That is the only way to be able to keep and to have a lower hedging. Exploration, development, that is a key, and a key is to replace our reserves and our production. Now, if you don't replace our production by organically, you have to buy. If you have to buy, you have to spend much more.
That means that you reduce your cash flow, your profit, and that is not our business to reduce our profit. Our business is to increase. Clearly, the reserve replacement duration is a key point, is a clearly key point of our strategy. For that reason, we are investing in technology. For that reason, we are also so selective in finding good exploration prospect close to existing facility in area where we have already some operation or existing facility also if are not our facility to be able to go fast. The average now, the average time to market, that is 2.7 years, that is one third of the average industry, show that our focus is at the maximum.
For the FID, the FID that we think to put in production as a number. We will be more clear during our strategy presentation, because if we talk about 2019 now, we don't have anything to say in one month. We are going to deliver about between seven and nine new FIDs that with the aim really to more than replace our reserves.
Claudio, can I ask where you think the commercial resource base of the company is, as distinct from SEC reserves?
Going to it, because Francesco was talking to me, I was following you, sir.
My question was where you think the size of the company's commercial resource base is, as distinct from SEC proven reserves?
14. About 14 billion, I think. Yes. A little bit more, we can say around between 14 and 15 billion.
Billions
The two billion reserves. Clearly, just to conclude what I was saying before, the organic growth and the replacement of reserves
It is a matter of to be low cost. That is one of the reasons why we can keep our CapEx flat. That is the reason why, also for the future, the only disclosure I can do about the future is that really we can keep our CapEx flat because all our assets, we are growing organically. We can phase out and phase in new projects. That is really one of the reasons why we have been able to reduce our debt and to increase our free cash flow.
Sorry, just a final point of clarification, the EUR 14 billion-EUR 15 billion would be consistent with your scenario planning, so based on sort of EUR 70 oil, something like that?
Yeah, exactly.
Yeah. Okay, brilliant. Thank you very much.
The next question is for Mr. Jon Rigby of UBS. Please go ahead, sir.
Yes, thank you. Sorry to labor the point on Abu Dhabi, can you just go through how we should think about this going forward, particularly in the context of the calculation or the indication you gave on profitability? I'm a little puzzled you talk about accounting for this in the associate line item. Do you, as we go forward, unpick the associate structure to look at a sort of fully consolidated Refining and Marketing business to calculate the break-even, or is that break-even calculated on the basis of the dividend inflow that you're getting? Just to clarify, please. Secondly, I take your point, Claudio, about not wanting to reveal everything about March 15th. Just to think about the context in which you will speak on March 15th.
You've talked about the $55 cash neutrality figure, $52 achieved in 2018. There's a lot of moving parts with the disposals, additions, et cetera. Obviously you've increased the perimeter of the business with the Abu Dhabi acquisition. The way to think about it going into March, would it be to think about whatever the moving parts end up is something in that $50-$55 range is kind of where we should expect sort of Eni's net performance to be? Thank you.
Okay. Massimo will answer the first question, the second.
Jon, technically you are right. The participation will be accounted based on the equity method. You will see the results pertaining the 20% that you acquire. In the cash flow, you will see the dividend. The number I mentioned before in the range of 10% in terms of yield refers to the dividend. That has been part of the negotiation we put in place. How to structure the dividend policy of the company. Let me say that this investment is a bit more than just an equity investment because we negotiated with ADNOC for more than one year about the technical assessment of the refinery and the way forward about how to increase the capacity, how to increase flexibility, and the efficiency of this refinery. We definitely, from accounting point of view, it is what it is.
From a business point of view, we really believe that our contribution will be much higher and will be part of the decision taken in Abu Dhabi refinery. Definitely, we will give you every quarter, while significant information about the contribution of this investment to our full result. Bridging from this answer to the following one relating to the cash neutrality, definitely based on this respect, we expect that the cash neutrality will take some advantage from this investment, because definitely we are talking about a significant rebalancing in our refinery capacity. We said 35% increase. More than this, definitely the break even of this refinery is much, much lower than the average that we have in Italy, basically in Italy, considering the historical asset base that we have. Based on this, we expect a positive contribution.
Definitely, we have moving parts, as you said, in our cash neutrality. 55 in 2018 does not include any disposal contribution. We do not believe that even considering no contribution from disposal, definitely we do not believe that our cash neutrality will be higher than $60 looking forward. We believe that our cash neutrality will remain definitely below this number.
Right. Thank you.
The next question is from Mr. Michele Della Vigna of Goldman Sachs. Please go ahead, sir.
Thank you. Claudio, one question. When you took over as CEO in 2014, you had as a strategic imperative to improve the business and geographical balance of Eni. Since then you've materially grown the LNG business, refining biofuels. You've created, as you highlight today, a major business in the Middle East. You've entered Indonesia and Mexico in scale. Is there any other part of your business that you think still needs to grow to provide a better balance, and where you see attractive entry opportunities at the moment? I'm thinking particularly in areas like Asia or North America. Thank you.
We have to do I think that we did a lot, and we did a lot very quickly, rapidly also because we had to fight the downturn and also because we had a good opportunity. As I said during the presentation, we'll be able to enter most of these new country, thanks to the technology and the know-how that we put in place. Middle East, in Middle East on the Gulf is not clearly is not finished. We just started. I think that we have to develop, to continue to work, and there are huge important opportunity to grow and rebalance further our portfolio. That area is quite important, and it's important in term from a contractual point of view, from a good asset point of view, from facility, maturity of the area. We are growing in Asia, so the gas in Asia is another target.
We have Indonesia, we have Australia that is growing, and we have to remember that we have Myanmar still under exploration, and Vietnam. There are area that in exploration, especially on the gas side, will grow. We have also, we are drilling an important well in Pakistan. In North, in the U.S., we are growing in Alaska, and that is the area where we are, but where we are increasing production, and that is an additional target, a main oil target for us. It's not finished yet. I think that we have to do much more to be able to be more resilient, more balanced. Clearly, all this effort is also based on our target to grow, but looking at our carbon footprint.
Clearly, we are working, from a technological point of view also to be able to grow, reducing our carbon footprint, clearly, at least for the Scope 1, to become carbon neutral. That is another important target. There are many things that are helping also to be more efficient, more effective, and also to have a better package to sell to the new country that we want to enter.
Thank you.
The next question is from Ms. Irene Himona of Société Générale. Please go ahead, madam.
Thank you. Good morning, congratulations on these results. I had three questions, please. Firstly, in July, you merged Eni Norge with Point Resources. Can you tell us the impact, in 2018, on your cash flows and cash balances of that deal, and perhaps remind us of the benefits you expect from this merger going forwards? Secondly, could you talk a little bit about cost inflation pressures? I noticed from your disclosures the full-year operating expense increased about 7%. Are you recruiting more people, or is there wage inflation? It would be helpful if you can clarify. Finally, your full-year capital expenditure was EUR 9.4 billion. Your net CapEx EUR 7.9. If you just remind us of the bridge or the components between those two numbers. Thank you.
Hi, Irene. As far as your first question about the effect of Vår Energi in 2018, I would say, along the year, during the year, in terms of cash flow economic terms, the effect has been zero because we deconsolidated Eni Norge and created, from an accounting point of view, Vår Energi starting from the 31st of December. The only effect we recorded are balance sheet effects. The balance sheet effect has been a deconsolidation of EUR 1.9 billion in terms of net capital invested. Looking forward, we expect definitely a positive contribution that remains in line with what we announced. A contribution to our cash neutrality decrease in the range of $2 per barrel. The integration activities are going ahead as expected, or even better than expected. Even from an industrial point of view, a new discovery has been announced.
The progress in Balder project that will be the next FID are going ahead in line with expectations. So far definitely so good.
CapEx split.
The CapEx split. Francesco saying that page 15 in our press release, you can see all the capital expenditure there, including investment, EUR 9.3 million, EUR 9.4 million. Net CapEx amounted to EUR 7.94 billion, excluding the following items: The entry bonus paid in connection with the entry in the new concession in the Emirates amounting to EUR 869 million.
Other non-strategic acquisition in mid downstream businesses for approximately EUR 100 million. This is the reconciliation between the EUR 9.3 and the EUR 7.9.
Okay. Sam, can answer about the inflation rate.
Okay. In terms of inflation and cost environment for the upstream, what we reckon through our market analysis is that offshore drilling rigs, we see some signals of recovery of the price, especially for jackups rigs, around 5%, while for the floater activity, the prices, the daily rate are still steady. For the rest of the supplies, like umbilical, blind pipeline, and production system, we reckon substantially steady prices. The same really also for turbomachinery. In this moment, there is still a substantial market oversupply. While services for drilling, we reckon a 3% cost increase. All in all, there is no, I would say, big changes in terms of cost inflation for the upstream costs.
Thank you. In terms of your group operating expenses moving up during the year 7%, is that linked to something specific? Is it wage inflation?
No, it is related to increased activity.
Thank you.
The next question is from Mr. Peter Low of Redburn. Please go ahead, sir.
Hi, thanks for taking my questions. The first one on Refining & Marketing. Your green throughputs rebounded in the quarter, which coincided with a stronger than expected result. Can you give any indication of the financial contribution of those green refineries and perhaps how you see that developing moving forward? The second was just another quick one on Venezuela. Obviously, the situation is pretty fluid at the moment, but can you give us an update on your operations there and the extent to which you actually think you can recover any outstanding receivables? Thanks.
Peter?
If I understood well, the question is the contribution of the green business. Okay. In the last quarter, we have a good margin of green product, and the Venice refinery increased the EBIT, and we closed the year with a good contribution of Venice, even if the capacity of the refinery is not so high. In the next weeks, we will start also with the Genoa refinery, that more than double the capacity of green, and the contribution will increase significantly.
Yeah. Just if I can complete the answer about the Venice refinery. They are positive. They are giving a positive contribution. Clearly, we have still, you know that we start using through our technology, second generation, also third generation, something that is not palm oil. The palm oil is something that has a cost because there is logistics, we have to import. With the upgrade that we are doing, looking for our green refinery, we'll use, and that is our final target, is second generation. Cooked oil or waste material, organic waste material, that is going to reduce all the logistic costs. Clearly, there is no compete with food, and it's going to increase drastically the already good performance of the green refinery. Yes. On Venezuela, the average production during 2018 was 48. The majority of the equity is coming from Perla.
We have Corocoro and Junín. The gas demand is lower than the capacity of our plant, and we expect to have it lower also during 2019.
The same range.
The same range, yes. However, the availability of the plant is there. In case of additional requirements, we are ready to deliver more gas.
In term of outstanding, the outstanding at the end of the year was in the range of EUR 700 million, more or less EUR 100 more than what we recorded at the end of 2017. During the year, we have been paid in the range of 35%-40% of total revenues. That's definitely something more than expected at the end of 2018. We expect that the way we are recovering partially the revenues will continue in the future. What is much more important, that the way we are recovering in euros outside U.S. is something that is not affected by even the new U.S. sanctions.
Thank you. That's very helpful.
The next question is from Biraj Borkhataria of RBC. Please go ahead.
Hi, thanks for taking my questions. I had a few on Egypt. Could you just comment on where you are in the restart of the LNG plant? It looks like this all continues to surprise on the upside. Just related to that, can you walk us through the key deliverables in 2019 for the phase 2 of the project? For Massimo, just a reminder, can you guide us to a cash tax rate for group for 2019? Thank you.
I'm going to answer about LNG. Antonio is going to answer about the progress of the project. Massimo the rest.
On the LNG plant in Egypt, we are there through our participation in Unión Fenosa Gas, the joint venture that we have and that owns and runs the plant and buys the LNG. You know, of course, that there was an ongoing, and there still is an ongoing litigation with the Egyptian government. The situation in the past months changed, in particular, through all the discoveries which were made. We are now, and we have been in this past period, in a framework where it is in the interest of all parties to have the plant restarted as soon as possible. The parties are discussing on that basis. They have been discussing, they are still discussing, and once there is the interest of everybody, you would expect that an agreement is found. Of course, the commercial discussion is ongoing.
Concerning the performance of our project at Zohr, we are producing currently, as you know, that 2.1 billion scf per day as a gross production, and our equity is 672 million scf. The major achievement that we are working for 2019 is train five, six, and seven completion. The first step of next grow is going to be 2.7 billion scf in July, six months ahead of our schedule. We're going to complete in September, the laydown of the 30-inch subsea line to increase our additional production to 3.2 billion scf, meaning that 980 million scf of equity. The gross production that we expect in 2019 is going to be 450 million barrel oil equivalent. In end of 2019, we're going to reach 580, which we're going to be in September.
We are quite okay on our schedule and ahead of six months for all the projects. In addition to that, we have completed more or less the line that's connecting, you remember, El Gamil for Nooros production with Abu Madi, and this is going to give us the bottlenecking on pressure, which we expect to grow up again on production of gas. Which will give us additional 200 million scf from the previous 1 billion. These are the plan for the 2019 in Egypt. Moreover, we are concluding our extension of concession on Western Desert in Egypt, and we expect to launch a large campaign of drilling on the oil discovery in South West Meleiha. This will allow also to launch additional production on the Western Desert.
Conclusion of our negotiation is going to be more or less in couple of months, and then we kick off all the activity there.
Okay, as far as 2019, we expect a cash tax rate in the range of 30%.
Great. Thank you.
The next question is from Massimo Bonisoli of Equita. Please go ahead, sir.
Good afternoon. Two quick question left. One, on the very positive marketing result in R&M division. Fourth quarter is usually a low season period. Could you give us some more details on this result? The second on Versalis. At the start of today, the scenario forecast was for an operating profit of about EUR 300 million. Clearly, the scenario was much different. Are there any operating issues also, or is only scenario related?
Okay. About the marketing, really in the last quarter of 2018, we had an exceptional performance, even if this winter quarter is not really the best for the marketing result. This is due to the very good performance of the retail, especially the national retail in Italy, but also in the retail in the European country, Germany, Austria, and France especially. In addition, the result has been supported also to the increase in the result of the wholesale, maintaining a good margin, even if in the quarter, the consumption slightly decreased.
Massimo, for the chemical side, you know there was a lot of good wind in the first half of the year. Unfortunately, this didn't happen in the second half. We are still very exposed in terms of polyethylene, in terms of the cracker margins, which in the second half of the year, particularly with the spiking of Naphtha, returned to the level of being very uncompetitive in Europe compared to Middle East and U.S. particularly. We didn't have really any issues on the operating side. In fact, the fact that we had less maintenance and good operation facilities helped us in mitigating some of the second half. Unfortunately, with the portfolio that we have today and continuing to trying to diversify and develop, we are still in the situation where the scenario had a big effect in the second half.
Very clear. Thank you.
Mr. Descalzi, that was the final question. I will turn the conference back to you, sir, for any additional comments.
It's okay. Thank you very much, and good afternoon.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.