Afternoon, ladies and gentlemen, and welcome to Eni's Second Quarter Results Conference Call hosted by Claudio Descalci, Chief Executive Officer. For the duration of the call, you will be in listen only mode. However, at the end of the call, you will have the opportunity to ask questions. I now hand over to Jovost to begin today's conference. Thank you.
Good afternoon, and welcome to our first half result presentation. Our long term strategy of upstream growth and mid downstream turnaround delivered excellent results in the first half. In upstream, production was 3% higher year over year and 6% considering the adjustment of for PSA effect and OPEC cuts. All the key developments have been executed ahead of schedule and on budget, delivering 3 major start ups: Block 1506 East Hub in Angola, John Creek in Indonesia and OCTP in Ghana. Dror is progressing ahead of schedule toward 1st gas by year end.
Continues with oil growth production above 200,000 barrels per day. The overall contribution of ramp ups and start ups has already achieved 200,000 barrels per day in the first half of the year. In June, we took FID for Cora Floating LNG, the first offshore development in the country, which will give us a material contribution from the beginning of the next decade, opening up a new LNG hub. Finally, Eni has made important new discoveries in the shallow waters of Campeche Bay in Mexico. We doubled the amok hydrocarbon estimate from 500,000,000 barrels to 1,000,000,000 barrel raising 801 Resources to 1,300,000,000 barrel of all in place with further upside.
In the mid Downstream, we recorded an EBIT of around EUR730,000,000 Gas and Power is on track to reach a structural positive result in 2017 for the first time in 5 years. R and M is continuing the trend of strong result with EBIT growing by 110% year on year and refining breakeven expected below $4 per barrel in 2017. Chemicals reached a new record achieving the best half result ever and the highest return on capital employed among our businesses. Cash growth is the most remarkable result. We generate €5,000,000,000 of cash flow from operation before working capital, excluding the negative effect of Vallagry shutdown that amounted to €150,000,000 in the quarter.
This doubled the size of last year's cash generation is well above the amount of €340,000,000 of CapEx in the period. Finally, in the 1st 6 months of the year, we have already collected €300,000,000 of net cash in from the disposals completed in the past month. And in the second half of the year, we expect to collect remaining amount equivalent to €3,700,000,000 Before detailing our operational and financial results, I'd like to elaborate on our latest exploration success. In Mexico, we were the 1st international company to make a discovery. We have drilled the Amoco II and Amoco III wells in the shallow water of Campeche Bay confirming and discovering major multiple oil prone reservoirs.
The Amoco field is now estimated to contain a resource base of 1,000,000,000 barrels of oil. AMOCO 3 has been successfully tested, delivering with high productivity oil with 25, 27 IP degrees and low GOR. In Area 1, where any old 100% stake, we will continue the drilling campaign with the Mizzon 2 and Teokali 2. On Amoco, we are preparing a planned development targeting an early production in the plateau of around 50,000 barrels per day and we foresee low development cost due to the fact that Tamoque is a shallow water field and just few kilometers from the shore. We are targeting the start up in the first half of twenty nineteen.
In addition, in June 2017, we won 3 more licenses, strengthening the presence in the emerging new oil basin with the aim of building a new core area in the country. For the first half of the year, we have already discovered about 500,000,000 barrels, more than half of our target for the year. Furthermore, the Mexico success enhances the optionality of our model that is based upon the DuExploration approach, which focuses on assets with high initial stakes and future disposal to accelerate cash in and reduce exposure and the fast track development to anticipate production, operational cash and reserves promotions. Development is an area where we have made major efforts over the last years in order to increase cost efficiency and reduce time to market. The start ups of 2016 and more recent ones in 2017 are a clearer evidence that this model is working effectively.
In February, the East Hub project came on stream 5 months ahead of schedule and the overall Block 1506 is now producing around 150,000 barrels per day of oil, 50,000 barrels per day net to 20. In May, we put more projects into production, Jan Creek an LNG development in Indonesia and OICTP, an oil field in Ghana. The ramp up of Jan Creek was already completed at the end of June, 2 months ahead of schedule, reaching a total production plateau of around 85,000 barrels per day, 45,000 per day in equity. On June 22, we delivered to Per Tamina the first LNG for the domestic market. And at the beginning of July, we lifted the 1st cargo for the export market.
In Ghana, the OCTV project was completed in 3 months ahead of schedule and is now in the ramp up phase, reaching a full production level of 45,000 barrels per day by the end of the year. The second phase will produce gas and will start in the first half of twenty eighteen, allowing us to achieve a production plateau of about 85,000 barrels per day. Finally, Dzor is progressing very positively with a progress of 80% at the end of July, and we expect to start up within December. We have already drilled 6 wells and almost completed the lay down of the offshore pipelines. The new offshore control platform installed in June is under commissioning, while the onshore gas plant is 70% completed.
These four fields are expecting to deliver 75,000 borrow per day of equity this year and more than 190,000 borrow per day in 2018. Thanks to this development, upstream production in the first half of 2017 was 1,783,000 bar per day that represented 3% growth. Factoring in OPEC cuts and PSA effect, first half production would have been 1,836,000 barrels per day, resulting in a 6% growth. In the first half, we had remarkable contribution from ramp ups and start ups of 200,000 bar per day. For the full year, we confirm our guidance of 1,840,000 bar per day, thanks to the contribution of around 270,000 per day coming from the project in Egypt, Angola, Indonesia, Ghana, Kazakhstan and Norway.
The good upstream EBIT result of €2,300,000,000 was related for around 80% to an improved scenario and the rest to better performances and cost efficiency. Upstream operating cash flow was around €4,200,000,000 with the cash flow per barrel in line with the guidance given at our strategy presentation. In the first half of twenty seventeen, we delivered positive results in our mid downstream segment, confirming the effectiveness and the turnaround program. In Gas and Power, we recorded a positive EBIT of €192,000,000,000 €192,000,000 €136,000,000 more than last year. Net of one off contribution, the first half result was 180 4,000,000 higher compared to 2016, confirming the material improvement of the underlying performance.
These achievements consolidated prospects for a positive and structural result of Gas and Power Business in 2017. In Refining and Marketing, we achieved a positive EBIT of €231,000,000 110% more than last year. This remarkable improvement is related to the optimization in crude supply and good performance in the retail marketing. Refining results were in line versus last year despite the offset of Sanodaro. And this year, we expect the refining breakeven margin below $4 per barrel.
Finally, Versalis reached an excellent result, achieving the full year target in only 6 months. This achievement has been possible, thanks to lower downtime and an optimized production mix and proves that Versal is now in the position to capture market opportunities. Overall, in the first half, the company generated €2,900,000,000 EBIT, an improvement of €2,100,000,000 versus last year. This result is driven by the improved scenario for €1,900,000,000 mostly in the upstream sector, growth and efficiency action for €400,000,000 one off effects and OPEC cuts for around €200,000,000 We generated a net profit of €1,200,000,000 the highest level since 2014. The average tax rate rate in the first half of twenty seventeen was 55%.
We expect, at our scenario, dollars 55 per barrel to have a tax rate of 65 percent on a full year basis, reflecting the growing weight of Upstream to the overall results. During the first half, we invested €4,300,000,000 a reduction of 14% against the first half of 2016. The projects, which start up this semester and the Dror development have been the main drivers of the first half CapEx. In the second half, investment will reduce their pace amounting to around €3,500,000,000 as major developments are completed. We confirm the full year CapEx will be below €8,000,000,000 representing an 18% reduction versus 2016 at the same exchange rate in line with our guidance.
2017 will be a year of strong cash recovery. In the first half, notwithstanding the volatile oil price environment, we generated €5,000,000,000 of operating cash flow, which allow us to entirely cover our CapEx, which reached a level of €4,300,000,000 In particular, in the Q2, we confirmed an accelerated trend of cash flow generation reaching a level of €2,300,000,000 compared to a CapEx amount of just €1,800,000,000 In the coming quarters, our cash flow will benefit from a larger contribution from production growth and we will reduce the pace of our investment, reaching a level of €3,500,000,000 in the second half. Finally, before the end of the year, we will cash in €3,700,000,000 mainly due to the Mozambique and Zohr disposals and the Belgian retail gas sales already collected in July. On a year basis, we confirm an organic coverage of dividend at about $60 per barrel, dropping to $45 per barrel, including the organic contribution of the dual expiration. This volume implies a full cash dividend and comes from the organic cash generation of our discovered reserve and production, while ensuring future growth and 100% reserves replacement.
Based on this performance, I will propose to the Board that we shall confirm an interim dividend of €0.14 per share. And now together with Massimo and all the company management, we are now ready to answer your questions. Thank you.
Thank you. First question comes from Mr. Oswald Clint from Bernstein. Mr. Clint, please.
Thank you. Thank you. So I'll be can I just ask maybe about the discoveries, another 500,000,000 barrels here this year so far? You already had a pretty healthy outlook on production, I think, well into 2025 from what you have discovered. So how do you think about that 3% long term production growth level?
Is that the right number? Could you do more? And if not, does it just means we're going to continue to see more and more of these divestments from the exploration side of the strategy? And then the second question is more on Jan Creek. I see you have won a contract to sell LNG into Pakistan from next year.
So what's that the original plan? Can you maybe tell us how much gas goes domestically versus LNG exports? And if there's any difference in the netbacks between those two monetization strategies? Thank you.
The first question about production growth, we confirm our production growth. Again, the strategy of 3% in the 4 year plan, 3% long term because it's based on the existing reserves, existing projects, very, very mature one. And it's clear that this year will be is higher than the 3%, but there is a on average, we can confirm. We are growing. We are production optimization and other positive results that help us to compensate some offset we had this year.
But overall, we can confirm. For exploration, for the U. S. Exploration, we are discovering like in Mexico with a very high stake because we own 100%. So the model we are confirming the model and we have after all these FID and projects long term, we still have some billions of resources that we found that are ready and ready for the dual exploration.
So the model is absolutely confirmed. For Janakryka, contractually, we have a 25 percent that flow into the domestic market and the rest is on the export market. We took in consideration these commercial aspects when we sanctioned the project. So there is no surprise and on average gave a very good internal rate of return. And so I think that the model is quite robust and Indonesia is quite robust countries and the 25% is a reasonable amount, especially considering then Indonesia need a lot of gas for the internal domestic consumptions.
Next question from Mr. Biraj Bogartaria from RBC. Mr. Biraj, please.
Hi, thanks for taking my questions. I had a few. Firstly, on CapEx. 2017 is obviously very H1 weighted. I'm looking at the Slide number 8, but the reported figure for H1 is about €5,000,000,000 in the first half.
So should we think about it as €8,500,000 CapEx for the year and then the difference between the two is received as divestments? That would be my first question. Second question is slightly related to that, but could you give any guidance on the Rosneft deal and when you expect that to close, whether that's 3Q or 4Q? And finally, just going to your production guidance. Q2 production was a little weaker than we had expected, but you've maintained the guidance.
So could you talk a little bit about any contingency you have within that $18.40 number and how much you have left there? Thank you.
About the first questions, I say a few things, then I Massimo will take over to complete the answer. In terms of CapEx, what we presented is a very robust one because we have a cash flow from operation that is quite high, higher than the CapEx and the CapEx of the second half will be lower because the major investment development being done in the first half and now we have just or And we have differences between CapEx and cash flow from operations. Clearly, what we said is that considering the dual operation, we have $45 of cash neutrality. And the $45 cash neutrality is made by 2 main components. 1 is the operating cash flow coming from our production.
The second one is organic cash flow coming from the dual exploration. So the answer is that the $45 is reached considering the 2 organics component. You want to say something about Dror, M and A and the rest?
But I confirm that the number we are projecting by the end year in term of investment is net of what we are going to recover through the disposal that we already signed mainly Zor. So this is the overall effect. And in term of timing, you don't know is, I'd say, is a bit long process. We very recently, we got the antitrust authorization. We're talking about the Rosneft deal on Zor.
So what is still missing some other bureaucratic papers to be prepared, maybe the closure would happen in the Q3 as a second chance, I would say, 4th quarter for sure in 2017.
The last question was about production growth in 2017 because we confirm. So what we can say that what we have in 2017 in the second half, first of all, we have 100% of ODAKRI that we recover starting from 2019 July. Then we have the cash again ramp up. We have OSTP ramp up. We have Istab ramp up and sound fields in Egypt.
So overall and Jan Creek is already in Ampad. So overall, we can consider that we have in addition, so 270,000 barrels per day, it's coming from ramp ups and new start ups that will allow us to reach these targets. We still have some contingency clearly in order of some 10,000 barrels per day, something around more than that. And we have also production optimization that is in the airfield, especially in Egypt and in West Africa that is going well. But that is real contingency because without any issue, we have all the barrels that we need to reach this target.
Next question from Mr. Brendan Warren from BMO Capital Markets. Mr. Warren, please. Next question from Mr.
Christian Malek from JPMorgan. Mr. Malek, please.
Hi, good morning, gentlemen. Just two questions. First of all, on Zohr, just if you could just elaborate more in terms of just the development plan. I know you talked about it being on track in terms of just sort of the CapEx associated with it. You saw to the extent you derisked that CapEx and what are sort of key milestones that you're looking for to ensure it comes to sort of speed to market by the end of the year?
The second question has come back on sort of cash breakeven. To what extent do you want to sort of lower this cash breakeven? I know you've talked about in 40s in terms of that target. But over the medium term, do you feel comfortable that you can get your cash breakeven post dividend into sort of the $40 to $50 range with the CapEx burden that you have, particularly developing the areas that you've discovered and so on. Just want to understand how you've calibrated that in the context of your €8,000,000,000 CapEx?
Jan Frodo, Antonio Gbaglo will answer and then Massimo for cash breakeven.
Okay. So concerning the situation of Zohr of today is we have let's start from the offshore. We completed already 2 well. The rig is on the third one. We confirm the rate of production above 2 50,000,000 scuff per well.
We may estimate also 300,000,000. And we are going to complete all the well within November. The sea line has been completed. We have just the last 9 kilometer of the 20 6 inches pipe. And onshore, we have already a progress of 80%.
We are intending to start gas in December with the first train of 350,000,000 scuff. And then immediately after, we grow with the 2nd train and 3rd and so on as planned at the beginning.
Thank you. But in terms of future cash breakeven, we never gave an exact number looking forward. What we said presenting our strategy that we are starting from 60% and we are going to decrease the breakeven all along the 4 year plan. And the result that we said the result that we are reaching in this quarter, this semester are comforting us that the future decrease is absolutely likely and available to us. CapEx door.
CapEx door. So we gave the numbers around €12,000,000,000 for a full development, part of them devoted to the first phase and that we are definitely fully in line even slightly lower than what we announced in this respect because we are recording a very good pro form a in term of from one side the activities and second, the latest contract we signed with the contractors.
Next question from Mr. Brendon Woon from BMO Capital Markets. Mr. Woon, please.
Yes, thank you. Hopefully this is connected okay. It's 2 questions if I may. Just firstly, you mentioned cash again a couple of times. You just talk about what sort of level we should be expecting it to reach plateau for in 2018 in terms of the ramp up?
If you can just touch on what activities need to be done? And then I guess moving to Chemicals, obviously, you've had a great result from the Silas, obviously, showing your benefits of your transformation program. How do you think about that asset still in terms of you obviously tried to offload a stake back in 20 15. Is it something that you still sell now see post transformation to put to the market? Or do you consider as a part of your core operating business, please?
Okay. So first question, Concussion, and Antonio Belo will answer. And then Daniela Ferrari and myself, we talk about chemicals.
Okay. As Claudio mentioned, 200,000 barrel and 210,000,000 is a normal rate of production those days. And the commissioning of the gas injection is in sour at this moment. So we expect any moment from now to start gas injection schedule. Thank you.
In terms of the chemical business, the results that you see appearing today are essentially the effect of the work which has been done over the last 2 or 3 years. So the combination of restructuring and closure unfortunately, portfolio and geography modification and a lot of efficiency on existing assets. And we are clearly in a positive scenario like that. We are capturing the maximum benefit of it. This is clearly there was a peak in the first half of the year due to some unexpected maintenance of other crackers.
But in spite of that, we will continue to benefit of these results for the rest of the year in a normalized way and expecting to be well above our forecast. In terms of the future of this business, I'd like to leave it to Claudio for comment.
So for chemicals, I think that is very interesting story. And the work we have done in the last years now is a lot also because if we consider the average price of 2016, it was lower. And normal chemicals with a lower commodity prices are getting better. And now we got an increase of 10 about $10 a day, so more expensive commodity and our Versace is doing better. So that means that what we have done in term of specialty, so reduction of capacity that are not very efficient, but especially changing products and increasing the pseudo specialties allow us to stay far from the commodity cost and became more structurally strong.
So Versalis is not at the end. I think that we still have a huge upside and it's becoming a very important business for us. It was not a few years ago because for years, we lost money. But now the very good work that our people are doing in Versania, changing completely the picture and is helping also the main business, the upstream business. If you consider that this semester also with the $10 more respect 2016, we had the result in the downstream.
So Versalis Chemicals and Refinery, more than EUR 730,000,000 that is very important, more than €600,000,000 of cash flow that helped a lot our consolidated result to reach €2,900,000,000 So Versalis is the present and will be absolutely the future. At the moment, we want to continue talking about the future to increase and consolidate this upside. And we think that we can grow, especially in green chemicals, where we have patents and proprietary licenses. And it's an area where we can increase our the quality of our product and also the resilient respect to the commodity, making Versalis more robust looking forward. Going back to cash again, just to complete your question about the ramp up.
Antonio said that now we are in decommissioning and we are injecting, we are really close to injecting this gas. And that means that after this injection, we can start a full ramp up that can bring us from the 200, 210 of today by the end of the year to reach the full production and the plateau.
Appreciate the comments.
Next question from Mrs. Irene Himona from OSJ. OSG.
I had a couple of questions. Firstly, on capital expenditure. You guide to no change this year, Claudio. But thinking about the 4 year plan, the €31,600,000,000 over the years, given your targeted production growth, in the event that we stay at $45 to $50 rather than improve towards your $60, dollars 65 scenario. How much CapEx flexibility is there to reduce that number, as I say, should the macro remain below your assumptions?
My second question was about working capital specifically. Obviously, in Q2, you had a reversal of a lot of the Q1 increase. Can you talk a little bit about the quarterly seasonality in that working capital, particularly as it relates to downstream gas? And perhaps what we can expect in Q3 and Q4? Thank you.
Thank you. I answered the first question and Massimo answered the second. For flexibility, in the full year plan, in the second half of the full year plan, we have 50% of not committed CapEx. So we have this 50% flexibility. The flexibility is due not just to the fact that we don't have commitment or final commitment of the CapEx, but also to the fact that we found with SCORVER very interesting resources.
Mexico is 1, but we have also in other countries, especially in North Africa and Sub Saharan Africa. And as we did in the past, when we have been able to reduce in the last 3 years, 38% of our CapEx expenditure, but increasing about 15% our production rate, that's been the highest increase in the industry. That's because not only we reduce CapEx, but we move CapEx to a less expensive asset. So that is clearly has a huge range of opportunity in front of us, especially in the last few years of the plan. I talk about 50%.
In talking about 2018, so what can happen tomorrow, this flexibility in term of CapEx volume can be reduced of about 20%. So we have a 20% flexibility on our plan that can be reduced completely or reduced partially moving to asset that very quickly can increase production, creating value and improving our cash neutrality. Mexico is an example, because we presented and we said we want to put Mexico in production in 2018. Clearly, we moved CapEx from one side to another side because they it is a fast track with a very high internal rate of return. But just to talk about numbers, 50% of flexibility in the last period and 20% next year.
Now I'll give the floor to Massimo.
So, Erinn, definitely, our working capital is exposed to seasonal effect. The worst quarter in this respect is the first one in the year. The second worst is the third one. This is related to the mainly to the mid and retail gas and power business for as far as the Q1 because of the delay in payment of the gas sold at the end of the year. So November, December, January, February, respectively, while the Q3 because of the storage of the gas in advance waiting for the seasonality.
Having said that, we had you remember an absorption in working capital in the Q1. 3 months ago, I said that this effect have been fully reabsorbed along the year and I'm confirming what I said. So now we have an absorption of around €300,000,000 We will keep on reabsorbing this effect in Q3, maybe with a lower pace because of the storage effect I just mentioned and fully in the Q4.
Thank you very much.
Next question from Mr. Alessandro Pozzi from Mediobanca. Mr. Pozzi, please.
Thank you. My first question is on Mexico. You had a great success there. I think a couple of other potential upside in the block over on top of what you've found already. And I believe you talked about Mexico as part of your dual exploration model.
So I was wondering whether it's to maybe to talk about potential disposals there. And second question on Gas and Power. You upgraded the guidance. I was wondering what gave you the confidence to upgrade the guidance now compared to the same months ago? And as we move closer to 2018, just wondering if there is any visibility on what Gas and Power can produce next year?
Thank
you. Thank you. With Luca, we answer to the first question there. Massimo Mantovani will talk about Gas and Power. So Luca.
Thank you, Claudio. Yes, we have 2 other wells that will be drilled in the second half of twenty seventeen in Mexico. And these are on 2 different structures than AMOCA where we drilled so far. So we do believe that we may still have some additional upside in the contract LR1 and we should see the result from these wells.
So as I said, Mexico is an ideal target for a dual aspiration because we are 100% and we are creating a big value and we want to grow fast to the FID for the first project. Clearly, it's not now the time to talk about that because you want to create and build up additional value on these assets before talking about exploration, dual exploration, but clearly is one of the future target.
For Kaizen Power, you are correct. As it was anticipated, we are now aiming a structural positive result from 2017. This improvement is mainly due also to the renegotiation of the gas supply long term agreement, which is undergoing and also, of course, on an improvement on the optimization of the logistic cost. And therefore, actually, these improvements are looking good for 2017 as compared to what we were expecting. And please also note that some of these negotiations like the Sonatrach we recently closed will have also impact on 2018 as the contract is for the gas year until September 2018.
So we are moving on the right track and we are, of course, looking at the further negotiation which is undergoing.
And do you have better visibility on next year earnings for the Gas and Power at the moment? Can
you repeat? Sorry, because they
Yes. Just wondering if next year, you can give maybe an idea of what Gas and Power can produce in terms of EBIT?
Well, we are targeting an improvement of what we were expecting and this is actually already been proven in 2017. Of course, the negotiations are ongoing, so we cannot really give figures about that.
All right. Thank you very much.
Next question from Mr. Massimo Consoli from Equita. Mr. Consoli sorry, Bonisoli, please.
Thank you and good afternoon, gentlemen. A couple of questions. 1 on the Retali Gas and Power business. Following your recent statements, could you share with us your thoughts on how would you create value on this asset going forward? And also considering the recent carve out, could you share some relevant figure of this business like revenue, EBIT or earnings?
The second question is on Voldagri. What is the remaining impact on the Q3, if any, of the production start at Coba?
Okay. The first question will be answered by Alberto Quarry and the second half by Antonio.
Okay. Thank you for the question. Of course, the way to extract value for retail market in Iguacelucci is going along 2 main lines. 1 is to extract more value from our current customers. I remind you that we have close to 9,000,000 customers in Europe, and this has to do with the improvement and introduction of all the services through the partnership we have with some of our partners.
So we are introducing insurance services, lead boilers, maintenance and these all these new products that should allow us to extract more value from our existing customers. The second line is to increase customers, and we are mainly targeting power market, power market in France, where we are entering into the power market, and we have already reached 100,000 customers, thanks leveraging on the existing gas customers and the power market in Italy. Power market in Italy is going through a liberalization process, and of course, believe that we can play a big role in this liberalization path.
As far as the Valtagri, the remaining effect in Valtagri, because I would like to remember that production really started up the 17th, 18th July. In terms of EBITDA or EBITDA, the effect would be, I would say, marginal. We are talking about something in the range of €30,000,000 a bit higher in terms of cash because we cash in the oil that we sold with a delay of 1.5 months. So the effect in terms of cash that we had in the Q2 would be more or less replicated in the Q3. I'm talking about something less than €100,000,000
Next question from Mr. Thomas Adolff from Credit Suisse. Please, Mr. Adolff, please. Okay, Mr.
Raul, you can talk.
Can you hear me now? Yes. Thank you. Great. Thank you and apologies for this.
I have three questions, if I may. Firstly, just on CapEx. Your earlier comments alluded to 20% flexibility for 2018. Now let's say this CapEx goes from 8,000,000,000 per annum to 6.5 and it stays there for a few years. Can you perhaps talk about what that means in terms of medium term upstream growth versus your 3% per annum target?
The second question I have is just some thoughts around the dividend and maybe not the right time to ask since you tend to give these updates in March. The strengthening in the euros obviously leading to a higher U. S. Dividend. And I'm just thinking how you think about managing this dividend.
I'm thinking about priorities is in case the oil price stays low for a little longer. Are you simply going to continue to fund it using your successful dual exploration strategy while maintaining upstream spend to deliver that 3% growth or looking at alternatives such as potentially introducing a temporary script? So I mean just kind of your thought process around priorities. The last question for Claudio would be very simple. What keeps you up at night nowadays?
What frustrates you the most? It can be internal things or even external things, but excluding the oil price. Thank you.
So first answer to the last question, I sleep every night. So I think that I have enough time during the day to do what I have to do. And the result and the restructuring of the last 3 years show that now we can't sleep because things are going very well. And that bring me to answer to the first question. The price remained $45 for 3 years, okay?
What we have done or what we have built in the last years is really to be able to tackle this kind of situation. When we said that during the strategy presentation that we projected our cash neutrality for 4 years at the level of $45 per barrel considering just an organic contribution, I mean, operating contribution and coming from the dual aspiration, we meant this kind of sensitivity. We meant this kind of situation. So the answer is that we built our strategy and VAR for a year plan to be resilient at a full year at $45 per barrel. So if something that delayed that happen, we have all the tools with some flexibility, but without reducing our growth rate to cope with the $45 So because that has been presented and all the projects have been shaped for this kind of possible situation.
We said we cannot do anything with the price, what we can do with our costs. And we work hard on our cost. That means not just cutting for cutting. I said we cut 38%, but we increased 50% 15% of our production. So I think that any is really structured to face this kind of situation.
On the dividend, no script. For the rest, Massimo can answer.
There is no anything to add. So as you said, Thomas, the best timing to talk about the new approach eventually about the dividend would be the strategy. As far as the current situation, we are still projecting in line with what we said in March. So nothing structurally changed. So as Claudio said, we definitely can survive with this level in the short period of time.
And we clearly we can have a balance without a specific priority because our plan aiming at, I would say, give ground for the production growth and the remuneration to the shareholder at the same time with a good equilibrium. As Claudio said, without any kind of additional effort such as the script or whatever.
Okay. Thank you very much.
Next question from Mr. Mark Koffler from Jefferies. Mr. Koffler, please.
Hi there, everyone. Thanks for taking my question. I just wanted to come to the commentary around capital spending program and the flexibility in the medium term in the context of Mexico and looking to move forward there at Amica. Can you talk about the types of development context you're considering at the moment? And then following on from that, the CapEx associated with that and if it's that project is going to take priority over any other projects in the queue, any commentary there would be really appreciated.
Thank
you. Okay. Mexico, I cannot give you now a figure for for CapEx for Mexico. What we plan really is to don't have any big upfront exposure in terms of CapEx. So that reason is a huge, is a giant project and we will we go we'd like to go through by phases, phase by phases, phase by phase.
Clearly, it's a shallow water, 20 meter water depth, 6 kilometer from the shore. You can use JACOB. You can use very, very not expensive facilities. We really think that this kind of investment can have a breakeven, a techno breakeven that is much less than $20 Now our Techno Group TV on average is $17 That is something that improved these figures in terms to have a lower breakeven. So it's very cheap, one with very small amount of investment.
When we talk about, because the right question that you made is, okay, flexibility, if you put Mexico, what other projects can go out of your basket? I can say that at the moment with the structure, with the price we have now, and with the flexibility of 2018, the 20% we discussed before, I think that this 20% can accommodate Mexico. We have flexibility where we have flexibility in some big projects, but we have flexibility especially in the production optimization that take a big part, at least 30% of our investment every year. That is a production optimization means in filling means some debottlenecking to increase the existing production. Clearly, we have to put in front all the different possible projects, production materialization, some long term projects, Mexico and other projects we have.
We still have some $1,000,000,000 of resources. As I said, that with a good optionality, we can put in production. And this project normally competes in term of different kind of risk integrated risk analysis, but clearly the internal rate of return, the NPV are very essential KPR. So I think Mexico is in a very good position to enter and maybe reduce some costs somewhere else. Clearly, the aim is to create value.
So we try to keep the same level of production. There is no problem. We have a big contingency, but we want to increase the cash flow per barrel. Our target is clear. We have a cash flow per barrel at about $65 of about 20 dollars $29 per barrel of cash flow per barrel.
We want to create, we want to improve this 20 $9 per barrel of cash that we create. And that means that Mexico absolutely has to compete with other projects. But in terms of CapEx, we have enough flexibility in space to introduce Mexico without increasing it.
Next question comes from Mr. Thiete Jardengam from Exane BNP. Mr. Jardengam, please.
Yes. Thank you. It's Thipan here from Exane. Two questions, please. Firstly, just on Venezuela.
Could you perhaps just give us an update in terms of ENI's exposure, Venezuela, both in terms of capital employed production and an update in terms of underlying operations in country? The second question, perhaps for Claudio, is just in terms of strategy, ENI has transformed its downstream business over the last 2, 3 years. As you start to see gearing lowered with the successful drill exploration program, I was wondering, is there any appetite to add capital to the downstream business going forward? Thank you.
Venezuela, I give you a first answer, then Athena, my colleagues can complete. What is happening in Venezuela is that we are producing, as you know, from an operational point of view, we are producing gas mainly. Our activity on the Ory Knuckle Belt are practically have been reduced, we can say, if there is no investment anymore. We are producing, but it has been really reduced and we are no more engaged in the full field development. The gas production is flowing.
We sell gas with the domestic market and there is some small exports. And this production is partially securitized by the condensate that we produce and then we can export and there are other form of securitization. We are as low as low recovering. We still have a we'll have an exposure. I think that nowadays, it's the only country where we have a material exposure.
We talk about €400,000,000 of exposure. That is not a huge figure, but it's not a huge figure because on a monthly basis, we are able to recover something. So there is no a buildup that can exceed reasonable numbers. So it's not a very easy situation. We are absolutely on top of the on top of it on a daily basis, not just for recovery money, but also for security reasons.
Fortunately, our activity that we share with Repsol is completely offshore and talking about Perma. The second, I don't know if you have anything to add. No. Talking about the strategy, I think that we work a lot and we change at least we change the trend and the parts of our downstream business and now we are very happy. Honestly, we are happy about the good result, the €2,900,000,000 of EBIT and more than DKK700 1,000,000 is due to our downstream business.
They reacted very well also to an increase of the commodity price, and we believe that we can do better. We have huge potentiality, and we have really the right people to work on this business and to improve it. So we'll see we are not now in the strategy presentation, but clearly, we put in efforts and now we have some very good staff in our hands and we want to really leverage the Downstream business for our future growth, also to counterbalance our Upstream business. So I think that for sure we own this business and we want to grow and we want to invest. These businesses are, they produce us more than €600,000,000 free cash flow.
So they have inside the potential and the resources to invest and to grow. And I honestly believe that we can do very well on it.
The last question from Mr. Ian Reid from Macquarie. Mr. Reid, please.
Yes. Hi, guys. Just looking for an update on your high impact exploration wells in terms of what's going on now and also the stuff coming out. Obviously, Cyprus is a key well. Also, I think you remember you were talking about drilling Zohr Deep at some point.
I'm just wondering whether you've drilled that and what the results of that were?
Luca is going to answer.
Okay. Regarding Zordip, we deepened one of our production wells in Zohr to the Jurassic, but we didn't encounter in that part of the structures any hydrocarbon. So now we are reassessing the model, and we will reevaluate the potential in the future. Regarding Cyprus, as you know, we spud in with Total. Total is the operator in Block 11.
That is the block just in front of our Sheruk block in Egypt. We're spudding the well just few days ago and the well is in drilling. And this could be, I would say, an important information to understand the future of Zohr like plays in the Cyprus, Cyprus water. Regarding our wells in Cyprus, we plan to restart a drilling campaign before the year end with new wells, 2 additional wells to be drilled back to back. As well, sorry, I missed the second part of the question.
I'm a
bit tired. As where Cyprus, I think, is the most important activity in the second half of the year, but we have some near field exploration wells in Norway to be drilled in the second half nearby Goyot. And also, we have a well in Ivory Coast, again, that we will drill together with Total. And that's the main activity of the second half of the year. Okay.
Thank you very much. I think that we are close our meeting. I thank all the people, investors and the analysts that participate. Thank you. Have a good day.