Good afternoon, ladies and gentlemen, and welcome to any 2017 Third Quarter Results Conference Call, hosted by Massimo Mondazzi, Chief Financial Officer. For I'm now handing you over to Jost to begin today's conference.
So good afternoon, good morning, depending where you are, and welcome to our result presentation for the 1st 9 months of 2017. We continue to deliver solid results in all businesses. In upstream, production in the 9 months was 4% higher year on year or 6% considering the PSA effect and OPEC cut adjustments. In exploration, we had an important success in appraising the potential of Area 1 in Mexico. We raised the overall resources in place to 1 400,000,000 BOE with further upside possible.
We therefore confirm our full year target of 800,000,000 BOE of discovered resources with a utility cost of $1 First gas from Zohr is expected before year end, whilst the other main startups, Block 1506, Istab in Angola, Jan Creek in Indonesia and OCP in Ghana, are ramping up better than expected. Our EBIT result is triple what we achieved last year. In the mid downstream, we recorded an EBIT of around €900,000,000 Gas and Power is on track to reach a structural positive result in 2017 for the first time in 6 years. Refining and market is continuing its trend of strong results with an EBIT which more than doubled year on year, leveraging on good refining results and a strong marketing performance. Refining breakeven is expected below $4 per barrel in 2017.
Chemicals achieved a new record in the 9 months and is targeting the best full year result in its history. In the 1st 9 months, we generated €6,800,000,000 of cash flow from operations before working capital at replacement cost. This is a €76,000,000 higher than last year's cash generation and €1,100,000,000 more than the €5,700,000,000 of CapEx in the period. This is equivalent to an organic cash neutrality of less than $60 having considered CapEx on a pro rata payment and full cash dividend. Finally, we confirm cash neutrality, including the organic contribution of our dual expression model of less than $45 per barrel in 2017.
This ranks among the lowest in our peer group for covering a full cash dividend. And now the upstream. In the Q3 2017, we produced 1,803,000 BOE per day, raising our 9 months average to 1,790,000 boe per day, representing, as I said, a 4% growth year on year or 6% when factoring in OPEC cuts and PSA effects. During this period, we anticipated the start up of our main projects, Istab in Angola, Janklick in Indonesia and OCTP in Ghana. These 3 fields are currently producing 90,000 boe per day.
In December, we will start up Zor that will reach first gas just 28 months after the discovery well and 20 months after the FID, a world record for a giant deepwater project. For the full year, we plan an average production of 1,815 BOE 1,000 BOE per day, matching our all time high in 2010. This level, taking into account the effect of PSA and upper cut, is equivalent to a 5% growth versus 2016. In the second half of this year, we recorded a slower ramp up from Kashagan, more downtime on Goliad, and shutdowns in U. K.
And Gulf of Mexico. The latter, hurricane related. These events has caused only a temporary slowdown of our production growth and determined the revision of our guidance as far as 2017. In the Q4, with the end of maintenance season and the progress in Kashagan, we are expecting to produce around 1,900,000 BOE per day. Our EBITDA of €3,300,000,000 3x last year was driven by an improved scenario, better performance partially impacted by OPEC cuts and higher exploration expenses.
OpEx at $6.5 per barrel and depreciation cost at $10.5 per barrel are in line with the budget. In the 9 months period, upstream operating cash flow adjusted for working capital and one off fiscal payment in Angola was around €5,800,000,000 equivalent to $13 per barrel. Taking to the lower scenarios, the negative effect of OPEC and Valdagri reduction, our cash flow per barrel in this period correspond to a $15.5 confirming the value accretion of our new barrels and an improvement of the original plan. And now the mid downstream businesses. In the 1st 9 months of 2017, we strengthened the positive result in our mid downstream segments, highlighting the robustness of the turnaround.
Gas and Power has continued to progress in its restructuring and was at breakeven during this period. Net one off contributions, the result was €364,000,000 higher compared to 2016, confirming the material improvement of the underlying performance. This achievement gives us the confidence to reiterate our guidance for a positive structural result in our Gas and Power business from 2017 on. In Refining and Marketing, we achieved positive EBIT of nearly €500,000,000 This remarkable improvement is related to the optimization in crude supply and good performance in the retail marketing, with an EBIT of €340,000,000 of euros Refining result at €1,100,000 were sorry, €120,000,000 were significantly better versus last year, despite the upset in Sanazzaro and the force majeure in Livorno. This year, we expect an EBIT refining breakeven margin below $4 per barrel.
Finally, Versalis reached an excellent result with more than €420,000,000 of EBIT. It will be the 2nd year in a row of record result for our Chemical division. This remarkable accomplishment was made possible by production mix optimized to capture a favorable scenario. During 9 months, this sector generated cash flow from operation in excess of €1,200,000,000 and the free cash flow of almost €900,000,000 including the benefits of the sale of our Belgium retail business. Overall, the company generated 9 months €3,800,000,000 of EBIT, an improvement of €2,800,000,000 versus last year.
This result was driven by the improved scenario for €2,500,000,000 mostly in the upstream sector, growth and efficiency actions for €500,000,000 and negative one off effect and doppler cuts for around €200,000,000 We generated an adjusted net profit of €1,400,000,000 The average tax rate in 9 months was 60%. On a full year basis, we confirm a tax rate of 65 percent, reflecting the growing weight of upstream to the overall result. The cash tax rate for the full year is expected in the range of 28%. Finally, our cash balance. Up to September, we generated €6,800,000,000 of operating cash flow, which allow us to more than cover our CapEx, which reached a level of €5,700,000,000 It implies that we were able to cover our investment and the pro rata full cash dividend with an oil price just below $60 per barrel.
This result would have been even stronger considering the not yet optimized performance in Kashagan and Goliath and the one off reduction of Valdagri. On a yearly basis, we confirm an organic coverage of CapEx and dividends at about $60 per barrel. Our organic cash generation is further reinforced by the dual exploration model, which allow us to anticipate cash flow of future production for our main discoveries. During this year, mainly due to Mozambique and Zor disposals, we will cash in €3,700,000,000 of which €1,500,000,000 was cash in in the 1st 9 months. This will reduce our full year dividend cash neutrality to less than $45 1 of the lowest in the sector.
With an expected leverage of 25% corresponding to a gearing of 20%, We confirm the strength of our balance sheet. And now to conclude, let me highlight in one slide the key messages for 2017 that we presented today. E and P will reach the highest ever level of production, and we'll continue to add high value barrels. Gas and power is structurally positive. Chemicals is beating new records, and R and M is further enhancing its resilience.
At less than $45 per barrel Brent, we have one of the lowest level of cash neutrality to cover CapEx, a full cash dividend and with the gearing is expected to fall at 20% at the year period. And now together with the company's top manager, we can open the floor to question and answer session. Thank you very much.
Ladies and gentlemen, the Q and A session is now open. I'd like to remind you that if you want to register First question comes from Mr. Clint Oswald from Bernstein. Mr. Clint Oswald, please.
Thank you. Massimo, I wanted to ask about the CapEx, please. I think you're saying it's coming in at €7,500,000,000 and that feels like, I said, a couple €100,000,000 less than initial guidance. If that's true, can you talk about where that saving is coming from? Is it one big project like Zohr or is it CapEx savings across all of the development projects and also upstream and also downstream?
And more importantly, will those savings flow into 2018 as well, please? And my second question was just on the liquids realization spreads that we're seeing here in the quarter and also for 2017, we're seeing the narrowing that's happening here through this year versus last year. Does that continue to narrow as Kashagan oil liquids volumes continue to increase?
So I'm going to answer your first question. I'm not sure I got your second question. Maybe later on, I'll ask you to repeat the question. So as far as the CapEx, okay. So yes, you're right.
We are expecting something less than €2,000,000,000 in the 4th quarter, so totaling something in the range of 7.5 The slight decrease versus the original guidance is, I would say, spread all around the businesses and, I would say, around the main project. You mentioned ZOAR. We are really well on track on ZOAR even in cost. So probably versus the original guidance, we recorded a slight decrease. But the costs were so low even at the beginning that the point is minimal.
And we are recording even a slight reduction in non upstream CapEx. I mean mainly in refining and in the chemical as well as the new businesses because we are a bit late in implementing our renewable project mainly in Italy. This is the first question. Could you repeat, please, your second question?
Yes. So I just thought your liquids realization versus
the difference between those is a lot narrower than the gap is a
lot last this year
and then 3rd quarter versus
Yes, yes. I confirm that we our realization is a little bit better, and we expect it will continue even in 2018, thanks to the mainly the production from Golar, Tecachagan that you know are high quality oil.
Next question comes from Mr. Ennis Kavadia from PVH. Mr. Kavadia, please.
Couple of questions. Just another one on the CapEx.
Given the move that we've seen in the euro dollar, I was wondering, should we expect flat CapEx in 2018 in dollar terms, I. E, lower CapEx in euro terms next year? And then second question, looking at the potential FIDs over the next year. So there's a number of projects that appear ready to FID. I just wondered which of these you think will reach FID by the end of next year.
And the projects I'm thinking of are Nene Phase 3, Omoca in Mexico, the Bamaba Onshore Project, Itan in Nigeria and the Cascio and CCO at 1 project? Thank you.
Okay. So as far as the CapEx guidance, I would say definitely we will be more precise when we present the strategy presentation next February. So we don't have now a guidance to be shared with you. But as far as I can see right now, there is no reason to change the guidance we gave for the full year in last March when we talk about an average of €8,000,000,000 per year. So it would be more or less the same.
So the expectation will be in 2018 such a level of CapEx untouched. And now I ask Antonio Vela to update you about the FID we are going to take at the end of this year and in 2018.
Okay. Concerning the FID of 2017, we are progressing quite well with young Casper with that oil. And probably we will progress in a final investment decision by end of November. So when it's the same day that we're going to present the POD to the authorities. So Jan Casper will be one of those 2.
The second one is Nidoko expansion, which we have a Phase III of Nidoko and will be done also this year.
So the project for 2018?
So 2018, we have Mexico, as you know that Mexico is ongoing. And Eitan, is also ongoing. We are receiving most of the offer for the final investment decision, but we are not quite sure that it will be done this year. Most probably will be done next year. Thank you.
Next question comes from Mr. Brandon Wern from BMO Capital Markets. Mr. Wern, please.
Yes. Thank you. Thank you, gentlemen, for opportunity to ask questions. Just first question is a clarification on your statements on cash again. I noticed Kazakhstan is obviously down this quarter in terms of production.
But if you can just clarify what you said about the slower ramp up and you gave some production estimates for 2018. Then my second question just relates to the Soles. Obviously, you've got you've had great results this last 9 months. Can you talk about, is there any change to, call it, mid cycle expectations into 2018? You touched on polyethylene margins being down into 2018 and stable sales volumes.
Should we expect better results in sort of the €300,000,000 guided at your Strategy Day? I'll leave it there.
Okay. So I leave the floor to Antonio to answer the question about cash again.
Okay. So we during the Q2, if you remember, we started the commissioning of the gas injection. And we performed additional maintenance, specifically in the Island A, which is this potentiality is 380,000. And the startup of Island Day is going to happen by 10th or 15th November. So, unfortunately, this have postponed the our ramp up, which will be completed by the first half of twenty eighteen.
In addition to that, we have completed all the shutdown of Caracachanac. And as Massimo mentioned, our growth on Kazakhstan in Q3 to Q4 will be 35,000 barrels.
Okay. So as far as Versalis mid cycle, certainly, as you mentioned, what we are projecting is worsening of the scenario. Probably the €300,000,000 of EBIT per year in the next 2, 3 years still remain our guidance as far as the expected EBIT for this business.
Next question comes from Mr. Thibank Jodlingam from Exane Peribus. Mr. Jodlingam, please.
Yes. Hi, gentlemen. I just had a question coming back to disposals. Could you just talk about, A, the timing and monetary value of the reimbursement CapEx disposals and how we should model that? Secondly, I think just in terms of the production disruptions ENI has suffered in 2017, I think you've mentioned cash again now.
Is there any other rollover into 2018 should think about? And thirdly, could you just confirm that your CapEx and your flexibility around group CapEx at 2018 still remains around 20%?
Okay. So about the disposal timing, you know, first of all, the big deadline. We already completed the Zohr disposal as far as the both the BP and Rosneft transaction. And we expect to complete the 25 disposal of Area 4 to Exxon by the end of this year. The €5 point €7,000,000,000 CapEx or the €7,500,000,000 as a guidance by year end are net of the CapEx.
We are in bracket savings because of the disposals. And as far as the numbers in 2017, we are talking about something in the range of, I would say, €700,000,000 as far as the 40 percent of Zohr, and we expect €400,000,000 as far as the 20% of Mozambique. So we are talking about 1.1 €1,000,000 saved as far as in 9 months, slightly higher if we project the number by year end. Let me complete my answer talking about the CapEx flexibility, and then I leave the floor to Antonio talking about production. So CapEx flexibility.
So yes, more or less, the flexibility we expect out of the assumed €8,000,000,000 in 2018 remain more or less at 20%. Definitely, if we as we go ahead and we are closer to the beginning of the year, we expect that this percentage will be slightly reduced. And now, Antonio, to answer about
Okay. So let's go back to the 3rd quarter, which the production has been $1,800,000 And how we're going to grow to $1,900,000 in this Q4? So as I mentioned you that Kazakhstan will grow 35,000 and we expect to back on cash again on oil of 240,000. In Italy, Valdagri, we got a shutdown of a month during the July. And then now we are on production.
It's going to grow 20,000 barrels. And then on U. K, we completed all the maintenance, and we will grow to 22,000. And Indonesia and Ghana will go over 13,000. And all the other maintenance, which has been part completed, this part is going to be completed soon.
And then this is going to be a robust value of 1,900,000,000.
Okay, great. I was just trying to
that CapEx? So the CapEx has been already received. So the we are talking about ZOOR because by definition, we haven't received any cash as far as Mozambique because we are still waiting for the closing. So talking about ZOOR, you know that part of the price will be delayed. So in 2017, we'll cash in something in the range of 65% of the overall cash, including the CapEx I just mentioned.
Okay. So it's in the disposal price?
Yes, yes.
So just to be sure that the information is completed. When we come to conclusion, so in the case of ZOOR, we already got the completion. All the CapEx will be reimbursed. We have been reimbursed as far as the CapEx before 2017 because the economic data we are referring to is for January 20 16. And part of the price, the 35% will be cashed in the next 2 years, I would say, mainly in 2018 and the remaining part in 2019.
Next question comes from Ms. Irene Himona from Societe Generale. Ms. Himona, please.
Thank you. Good morning, Massimo. I had two questions, please. Firstly, Gas and Power, in particular, retail gas. You separated that business out in a subsidiary earlier this year.
In the past, you had called it non core. Now in today's press release, you seem to be saying you latest thinking strategically about this division? My second question, refining and marketing, which was very impressive this quarter. Can you just state for us refining from marketing in Q3 in terms of EBIT?
Okay. So strategic thinking about Gas and Power, yes. The what is the current strategy underlying on this prospect is to keep the gas the retail business in our portfolio. So we changed a little bit our mind versus what we said more or less 2, 3 years ago when we judged this business as a non core one. Why we did it?
First of all, because the work that is being done injected in retail gave a significant return and it gave confidence to us that this could be a good business to be retained in our portfolio with good perspective even in term of growth. And second, we realized in this, I would say, uncertain environment to keep, I would say, a quite stable or any way a nonrelated brand business in our portfolio is something positive. So that's the reason why the current idea will be to keep on developing the retail business, selecting our clients, but at the same time, trying to enlarge the number of product to be sold through our customers and increase the return we can get from the customer is definitely the strategy we intend to follow. And as far as the refining and marketing in term of EBITDA, as far as the Q3, so in term of marketing, so the overall is 200 and 20, 24. And as far as marketing, the contribution is in the range of 130.
And as far as the refining, the remaining part. So more or less €90,000,000 €94,000,000 of euros. That's enough.
Thank you.
Okay.
Next question comes from Mr. Biagio Borkadaria from RBC. Mr. Borkadaria, please.
Thanks for taking my question.
The first one was on cash
flow generation. Could you just elaborate a bit on the extraordinary tax payment in Angola? That would be helpful. And if you're expecting anything similar for any other regions maybe in the next couple of years? And the second question is pretty much similar.
Is there any color you can give on P and L
taxes versus cash taxes, especially as
we look out into 2018? Thank you.
Okay. As far as the taxes, I afraid it's a bit it's too soon to give you a guidance. I would say nothing can drive me to give you a different guidance as far as 2018. So more or less, we expect a 65 percent of tax rate, assuming an environment, mainly a Brent price in the range of $55 per barrel because we expect that as the oil price will grow up, even our as we said a lot of time in the past, even our tax rate will be lower. And the first question was about Okay, the young Garland.
So we paid $170,000,000 of U. S. Dollar. This is a long lasting negotiation with the Angolan tax authorities involving all the international oil companies operating there. The period of time under negotiation was very long, starting from 2,002 to 2016.
It was related to how to deduct some items, some operating items in the existing contracts. The payment we made is definitive. So all the discussion, all the negotiation now in the countries are over. It was an extraordinary situation in our portfolio, and we do not expect any other negotiation like this in the near future.
Next question comes from Mr. Matt Koffler from Jefferies. Mr. Koffler, please.
I just wanted to come back to the production growth numbers that you've outlined to the airline for Q4. So the line is breaking. Can you just reiterate how you move up to 1.9? And then also, could you talk about 2018? I know that perhaps you have given an exit rate for the prior year, so maybe an exit rate 'seventeen or any more color around the 2018 compression profile would be useful.
Thanks.
Okay. I'll give the floor to Antonio to talk about the increase from 1 €800,000 to €1,900,000 of BOE in the 4th quarter.
Thank you, Massimo. So as I mentioned before, the 1,800,000 barrel per day on the 3rd quarter, it will grow 100,000 barrel plus. In 1,000,000,000,000 with a contribution of 35,000 from Kazakhstan, mainly from Carraca Canac because all maintenance has been completed. And Italy plus 20,000 barrel from Valdagri, as you remember, the shutdown on July. And U.
K, +22 because we ended all the maintenance between Airlift Franklin and Liverpool Bay. Then we have growth on Indonesia and Ghana on 13,000 barrels per day and other maintenance. So that is going to be the $1,900,000 that is going to end the year of 2017.
Okay. So Mark, as far as the guidance in production for 2018, again, we are now internally working around the new strategy plan. So it's a bit soon to anticipate if there is any change versus what we said in March. So maybe we can update you in the next week on this respect.
And still too early for an active rate response to this year?
Yes. The exit rate will be slightly higher than the 1.9 1,000,000 BOE that just Antonio mentioned.
Next question comes from Mr. Massimo Bonizoli from Equita. Mr. Bonizoli, please.
Thank you and good morning. A couple of questions. Back to Valdagri, you assume higher production in Q4. Could you give us some color on the reinjection activity considering the request from local authorities? And the second question is any color on the strategic thinking on Versalis considering all the option in place.
Can you give us an indication on how many months roughly will it take to IPO Versalis?
Okay. I'll give the floor to Antonio for the No, I'm
sending the actual production of Valdagri as far as today, we are at 60000, 68000 barrels per day equity. So we still have a very good production in Baldagri. What we are missing today in term of reduction on oil due to the Costa Molina to closure is between 6000,000 to 7000 barrels per day. So the as you know, the 9 October, the region council of Basilica have issued a suspension act for the water injection based on trace of organic compound and mines in particularly found on sample of the water collected, both from reinjection water tank and the plant of Costa Molina reinjection well. As far as the protocol, we agree when we restarted the production after the separation of the waters, ENI made over 200,000 sampling and tests, sending all this evaluation to the authorities.
So at the moment, we are trying to find out the way that the analysis of the Regional Council has been made. However, the issue is under clarification, and we don't expect too long to wait the reinjection.
So Massimo, talking about Versalis, the strategic thinking about Versalis to keep it and to try to maybe to reinforce it is mainly on the biochemical branch of activity. So there are no projects about IPOs or something like this. So by definition, no time now projected to come to that conclusion. That is not on our table today.
Next question comes from Mr. Thomas Adolff from Credit Suisse. Mr. Adolff, please.
Good morning, good afternoon. Thank you. I've got three questions, if I may. Firstly, on production, and please correct me if I'm wrong here. I think every year or at least this year, when you provided guidance, you had a contingency buffer of about 30,000 barrels per day.
And then your guidance for the full year was 1.845. You now guide to 1.815. So in theory, there's a loss of about 60,000 barrels per day or about 3% of production. And I wondered how this is split across Goliad, Kashagan and Bal Dagri or if any other fields may have disappointed? The second question on Kashagan again, and it feels that every time you provide an update, it kind of gets a bit worse.
So I just wondered whether one should have been a bit more conservative in the guidance for complex projects such as Kashagan to begin with? Or were these hiccups really truly unexpected? And I just also wonder what this generally means for your forward guidance, whether these are sufficiently risked or lacking contingencies. And the third question I had was on Goliad. Again, on Goliad, it's been up and down.
And if I have the numbers right, both planned and unplanned, it's down about 12 weeks this year. That's almost a quarter. Now I'm just wondering whether you feel confident that you should be operating this project or whether it should be handed over to someone else?
Okay. So let's answer first your question on on Goliad. So he and I want to operate the rig the field, and we are quite confident on the capability of producing Goliad. However, as you know, the shutdown of 3 weeks has been postponed from first quarter for Q2 to Q3. The work has been completed on the second of October.
And then after that work, which was planned to do during the production, we received an order from PSC to make it an inspection of recertifying electrical for 250 motors. The work has been completed successful. No surprise came out on the 250 motors. So now we are recompleting again all the activity, and we expect 1st week of November to back on full production again on Goliat as we've been experienced before. Concerning the contingency, and we've been including a contingency of Goliath.
And as you know, Nigeria and Kashagan, it's already has been introduced. We have on the next quarter, we'll have 5,000 barrel contingencies remaining, which is quite enough. In cash again, I think as I mentioned, the commissioning of the compressor reinjection was successful. And this is not an issue concerning your expectation. So the main issue was the maintenance on Island A, which counting 380,000 barrels per day.
And you can imagine what doesn't mean. This is going to be completed very quickly in mid of November, and the ramp up will continue as always the joint venture being presenting.
Thomas, to complete what Antonio said and recapping about the contingency, I would say, I would like to add that in the past, we already matched the guidance that we gave about production. Sometimes we perform better than the guidance. So this is the first time we have been forced to revise the guidance because of the fact that the unplanned shutdown that took place in the 2nd part of this year. We already absorbed a significant part of the contingency we had in the budget because of the unplanned shutdown we had in Valdagri in June, July. So that's the reason why we remain short of contingency, and we have been forced to reduce our guidance.
Next question comes from Mr. Alessandro Pozzi from Mediobanca. Mr. Pozzi, please.
Thank you. So the first question on cash flow breakeven. I believe your breakeven was around $60 per barrel in the 1st 9 months with volumes up in Q4 and potentially CapEx down. Just wondering if you can give us a bit more color on how the breakeven could potentially reduce in Q4? And also second question, I believe your target is to get to a gearing of 25%.
I believe there's probably be more than €2,000,000,000 of disposals that help you achieving that target. Just wondering if there is maybe some working capital movement on top of that. Thank you.
So as far as the cash breakeven, you correctly are confirming by year end. So and we are confirming by year end. So all in all, the cash breakeven we expect in the Q4 even if there is I would say no sense to calculate the cash breakeven applied to such a short period of time. So it remained around $60 for an average of $60 in term of full year cash breakeven. As far as the leverage, you correctly mentioned the 25%, 25% will be reached.
Thanks to the cash in of the 25% disposal of RAV4 in Mozambique. This is the we said the most important contribution. We expect there are no significant contribution coming from working capital or more than normal coming from working capital in the 4th quarter. I have in mind a number that could be in the range of €300,000,000 more or less, no more than that.
Okay. And just one thing on pro form a CapEx, is going to be similar to the overall CapEx in Q4?
Yes. The $7,500,000 include the what we are saving in term of disposal. That we say, as far as the most important part, as far as ZOAR, I would say is done. So because the contract has been signed, what could be potentially a viable part is the CapEx related to Mozambique that is a bit that is expected to be closed by year end. If not, the amount of CapEx that could be, I would say, postponed in term of recovery to next year is in the range of €400,000,000
Next question comes from Mr. Rob West from Redburn. Mr. West, please.
Hello. Thank you very much for taking my two questions. The first one is on ZOAR. You highlighted some very strong well deliverability last quarter around 250,000,000 cubic feet per day. Have the recent wells been coming in as strong as those previous wells?
And does that give you any room to change the development plan, for instance, using longer tie backs or anything around the development there? And then the second question I was going to ask you is just around the exploration plans in Mexico. I think there are 2 wells coming up in the plan. Do we have any update on the timings of those and any initial indications if any of them have started drilling?
So Antonio and Luca to answer.
Okay. Concerning Zohr, we are progressing as always we've been mentioned. So the first gas is confirmed, as Massimo already stated, in December. So just to brief you where we are with all the development. So back to the deepwater, so the drilling and completion of the 8 wells, as you know.
So 4 of that has been already completed and 2 of these are already connected and tested to the main pipeline. So whether with the 14 inches gas line, it's already connected and tested, ready for production. The 8 inches also tested and ready for mag injection. And the 26 inches pipeline is already connected to the shore and tested, ready for production. As we've been always mentioned that the onshore activity is under commissioning and we will complete all the connection and testing by, let's say, end of November.
So the deliverability of the well has been also tested, and we are moving between 250,000,000 to 300,000,000 scarp per well. And the first train is going to be 350,000,000 scaf, the early production. And then the ramp up, as you know, as per POD presented. So the plan has not changed because of the production per well because the
current production per well is exactly what we expected since the beginning. We already tested the production before launching the development plan.
All the 4 well has been cleaned up and tested.
Regarding Mexico, we are currently drilling our 4th well, and we expect to reach our targets in around a couple of weeks. The next plans comprise the testing of the 2 wells that we recently drilled for assessing the deliverability of the wells. So before the year end, we will have a result of a far term well and the testing results.
Next question comes from Mr. Lucas Herman from Deutsche Bank. Mr. Herman, please.
Yes. Thank you and good afternoon gentlemen. A couple if I may. Firstly, the dual exploration model, very successful this year in terms of realizing proceeds. As we look forward, what sits in your hopper or what exists today that you might be able to remind us of and talk around in terms of material potential revenues or proceeds into the future?
And perhaps within that, maybe give us some indication of where you see your equity stake remaining within Mexico, which I presume you will sell down at some other point? 2nd question, just on Gas and Power and going back to Irene's comments on retail. When you gave your forward guidance on the profit potential of Gas and Power into the medium term, did that assume the retention of the retail business? Or should we feel more optimistic about the potential of the business now? And finally, just a simple question on Intisar or the volumes from Intisar.
Can you remind us what the level is and when those volumes start to drop out of your production schedule? Thank you.
Okay. I'll answer your dual exploration question maybe together with Luca and Gas and Power and then leave the floor to Antonio answering about Intisar. So as far as the dual exploration, you mentioned Mexico. Definitely Mexico could be the next step on this direction because we are retaining 100% of the Area 1 in Mexico and there is no percentage a minimum percentage. Definitely, we would like to retain the operatorship.
A dilution of 30%, 40% would be something that could be definitely achieved. And then other potential target the future could be Indonesia, where we are retaining significant stake in around John Creek and Merakes. This will be, I would say, next the next target. Yes, Gas and Power, we had 2, 3 years ago project to divest in the retail business. But this project, you remember, we always said that the industrial projection were made including retail without any disposal proceed including in our disposal program.
So no effect about potential disposal. And now what we are projecting remain on the full activity including 20 retail. So no, I'm afraid no potential upside in terms of guidance as far as this aspect. And now I leave the floor to Antonio to answer about Intisar.
So as our agreement of Intisar is going to be completed by the end of 20 18. And distribution of the production has been kept constant among all the years.
And Antonio, what remind me what that production is and therefore what falls out?
So the production allocated was 70,000 for single years and then is going to be completed in the next year.
Sorry, and that's 70,000 barrels of oil equivalent?
That's right, yes.
Okay, that's great.
Thank you very much.
Thank you.
I'm sorry, may I go ahead?
Yes, please.
Next question comes from Mr. Hermitage Clegg from Merrill Lynch. Mr. Clegg, please.
Hi there. Good morning. Three questions from me. Just to get back to Goliad. I know people asked about it again a year ago.
We were reassured that everything was okay and it's persistently being switched on and off again. Could you reassure us what work has been carried out and why the PSA made you switch it off? Secondly, just on ZOOR, I know timing is meant to be on track for the year end. We've seen many projects creep. Is there a risk we see the start up creep into 2018?
And then finally, and this may be too long term for the call, but could you tell us if you have any views or thoughts on preparing your refineries for the 2020 change in marine fuel regulation that we expect to impact the market being imposed by the IMO?
Okay. Antonio, to answer about Goliath and Zohr, and I'll answer about the refinery expectation.
Okay. As I mentioned in Goliath, we did 3 weeks shutdown, agreed with the authorities. And then at the completion of the shutdown, we got an instruction from PSE to look at the 250 motor, which we've been planned to check during the production. So this is the latter the last activity that has been discussed with the authority and we do not expect any more reason to shut down Goliath again. So this has been several times discussed with the authority and we are confident that has been completed all the checks they've been requesting.
Concerning Zohr
You've agreed, after you've completed the checks. Sorry?
And they've you've done the checks and they're happy with that.
Until today, we have completed all the motors and nothing has been identified on the recertification. And this has been the 3rd recertification on all the motors. So we are they are quite happy now, and we are planning to start up jointly with the PSC and the safety delegates, as you know. Okay. Concerning ZOOR, we are as I mentioned to you, we are making a progress of 4% or 5 percent per month.
And today, we are close to 90%. And this is why we are strongly confident to produce gas in December. The window is going to be after the mid of December. Anytime from there, we're going to produce gas.
And as far as the refinery, the new sulfur content regulation, we are quite positive on this because you know that our refinery system is a complex one. So we are definitely prepared to deal with this new regulation. The real effect are quite uncertain in terms of changes in prices and quantities, But our expectation will be that at least this positive effect should counteract the expected reduction in the European refining margin. That's the reason why we for the future, we are projecting a stable refining margin in the range of $5 per barrel.