Afternoon, ladies and gentlemen, and welcome to Eni's Second Quarter Results Conference Call, hosted by Claudio Descartes, Chief Executive Officer and Massimo Mondazzi, Chief Financial and Risk Management Officer. For the duration of the call, you will be in listen only mode. I'm now handing you over to your host to begin today's conference. Thank you.
Good afternoon, and welcome to our first half twenty sixteen results presentation. In the first half of this year, we continue to execute our strategy and perform in line with our plan. In particular, in E and P, we were able to fully offset the shutdown of Baldagri and disruptions in Nigeria, even managing to increase production by 5% year on year. Thanks to the flexibility coming from our exploration and the pipeline of new startups and ramp ups that will continue in the next couple of years. Production growth contributed to an overall positive EBIT of almost €500,000,000 despite Brent being below $40 per barrel and the depressed gas price.
Exploration has already beaten the full year target with 550,000,000 barrel of new resources discovered in the first half. In mid downstream, about €400,000,000 of EBIT with all segments delivering positive results. In refining, we continued to restructuring program, confirming the breakeven guidance for 2016 of $4.5 per barrel. In chemical, in chemical sector delivered its 3rd consecutive semester of strong results, thanks to the utilization of our operation in the positive market environment. In Gas and Power, we recorded positive results in the first half of the year, and we continue to progress in the turnaround plan that targets structural breakeven from 2017.
CapEx was reduced by 17% in the first half, confirming our target to reduce this by 20% for the full year when we benefit from the completion of some major projects in Angola, Kazakhstan and Norway. Overall, in the first half of twenty 16, the company generated an operating cash flow of €3,100,000,000 For the full year, we are in line with the planned operating coverage of CapEx at $50 per barrel. In E and P, first half production was 1,734,000 barrels per day, 5% higher than last year. This result was achieved notwithstanding the shutdown of Valdagri that weighed in for 33,000 barrels per day and additional disruption in Nigeria for 13,000 barrels per day. Our performance, partially supported by the PSA effect, has been mainly driven by our start ups and ramp ups.
In Angola, where Block 1506 was already reached a plateau of 90,000 barrels per day, in Norway, where Goyot has successfully completed their ramp up to about 100,000 barrels per day in Egypt, where in only 10 months after discovery, we raised Nourous production to today's level of more than 70,000 barrels per day. Looking forward, we expect the result of restart of Valdagri Field in the coming weeks, and we plan to add cash again back on stream in October. Thanks to our performance in the first half and further growth, we confirm the full year guidance of 1,760,000 barrels a day. In exploration, we have already beaten the full year target. We were targeting to find 400,000,000 barrels of resources at $2.3 per barrel.
After 6 months, we have already discovered in 6 of 500,000,000 barrel at around €0.60 per barrel. Main contribution come from Zohr, a price of phase and the major gas and condensate discoveries in the Egyptian shallow waters, confirming our strategy of refocusing on near field activities that provide fast track production. The new Nidoka wells and the Baltin Southwest well announced that the carbon potential, what we call the Great Nowruz Area now estimated to hold about 3 Tcf of gas in place. The Neuruz field discovery in July 2015 is already producing 70,000 barrels per day and is expected to reach 130,000 barrels per day by October. In the first half, we have also continued to appraise on Dor with 3 wells, all with positive results that confirm the world class potential of this supergiant.
Dor 2 has been tested, confirming the great potential production potential and reservoir characteristics. We are currently drilling the 5th well in the southern part of the structure. During the first half, we invested EUR 4,900,000,000, a reduction of 70 against the first half of twenty fifteen. This trend is in line with our guidance of reducing 2016 CapEx by 20%. The start ups of Goliath and Kashagan, along with the completion of most capital intensive activities of projects that will start up in 2017 will slow the spending pace in the coming months.
This CapEx reduction is even more remarkable if we take into account that we will deliver a growth in excess of 5% in 2017, thanks to the pipeline of material startups. We are on track on 8 major new projects that will expand our cash generation with an overall equity production of around $500,000 per day in the next 3 years. This new production is almost entirely operated and characterized by high oil content. And now few comments on the economic results. Economic result was heavily impacted by the negative scenario in oil, accounting for 31% fall in Brent and 37% in gas price in Italy.
And the refining margin that came down by 32% with an overall EBIT reduction of €2,800,000,000 versus last year. In addition, one offs related mainly to Valdaghri shutdown and Gas and Power impacted by a further €500,000,000 All these negative elements have been partially compensated by performance improvement driven by a lower cost base as well as efficiency gains in the mid downstream segment, which brought a €1,000,000,000 of improvement, allowing us to reach a positive EBIT of €770,000,000 At net level, we recorded a negative result of around EUR 250,000,000 penalized as already anticipated by the higher tax rate paid on positive result in PSAs. In terms of cash generation, in the first half, we generated EUR 3,100,000,000 of operating cash flow in spite of the weak price environment and the Valladaglia production shutdown, reaching a leverage of 0.26. We expect to improve cash generation in the second half with Goliad now at plateau, the return of Valladagri, the restart the start up of Kashagan, the growing production in Egypt and other supporting actions. Capital expenditures in the second half will be will benefit from the roll off of recent large projects that have reached plateau and further optimization in the supply chain.
This factor allow us to reiterate our guidance to cover CapEx from operating cash flow at $50 per barrel. To sum up, based on the first half operating performance, we update our target as follows. In E and P in 2016, we confirm our production at 1 point 76,000,000 barrels per day and raise our exploration target by 50% to 600,000,000 barrels. We confirmed a 20% CapEx reduction in 2016 while targeting a production growth of more than 5% in 2017. In Gas and Power, 2016 EBITDA will be negative due to the lack of positive contribution from the Gas Terra Retration, but free cash flow will be largely positive.
Natural breakeven from 2017 is confirmed. In R and M, we confirmed the refining sectors breakeven at $4.5 per barrel in 2016, and we target to be both EBIT and free cash flow positive. Finally, in Chemicals, we expect the business to be both EBIT and free cash flow positive in 2016. Based on this, I will propose to my board an interim dividend of €0.40 per share. Thank you for your attention.
Now with the CFO and the other management team, we are ready to answer your questions.
Ladies and gentlemen, the Q and A session is now open. Thank you. First question comes from Mr. Oswald Clint from Bernstein. Mr.
Clint, please.
Yes. Thank you very much. Good afternoon. I just wanted to ask a bit more about the Gas and Power and the implications of the gas tariff deal. I think you've given some comments there, but is there anything is there anything more we need to know about that?
Are there any other conclusions to deals that are included in 2017 guidance? Or that structural breakeven next year is not dependent on any further gas contract deals? That's the first question. And then secondly, just on gearing, I think, obviously, it still looks pretty good. I think you say below 30% or 0.3% is still dependent on asset divestment deals progressing, I think, through this year into next year.
So maybe an update on those particular divestments, please? Thank you.
Okay. And Berta Berginan, that is in charge of Gas and Power, is going to answer on the first question.
Well, the Gastera arbitration outcome, as we have seen, significantly impacted on 2016 because we have not cashing retroactive payments. The gas tariff negotiation on this contract is not over. Basically, we are now starting a new price review based on different concept than the one that we have submitted so far. So the gas tariff price is not defined by the present arbitration award. Yes, certainly, the 2000 guidance is impacted by the outcome of other negotiation.
We have a number of negotiation on Gordon, as we always indicated, on a number of counterpart. And as a matter of fact, we have already achieved in some cases a positive result like the reduction of the take or pay, like having today about 65% of our portfolio already have indexed. The process is not completed and is a fundamental step in order to bring our business a breakeven. For next year, we expect to see therefore contribution by the renegotiation on the long term contract. Contribution about cost reduction on transportation cost and our logistic cost.
We expect to have like we had in the first half this year, positive contribution from our operating activities and we have always a continuous good result from the retail business.
A few comments about the leverage and how we are resilient about the situation of today. Then I give the floor to Marcin to talk about M and As and what we are doing. If we analyze the 1st 6 months, we see that we have been, for the industry, very tough in term of oil price, gas price. The refining margin for the first time was not anti cycled to the oil price because we had a very low refining margin. And for us, we have to add also the Valvargos, the 4 months 4 months now, we are not in production, has been really a stress test.
I think that we really passed through a quite tough situation. And if you look at what we have done, I mean, we practically, we have been able to compensate partially, but a price effect of EUR 2,800,000,000 then Valvagu and Gas and Power Asset EUR 500,000,000. And we produced an additional after budget of EUR 1,000,000,000 working on cost, on production. We recovered practically all the production we lost, so we can confirm the budget. And we have been able in this very, very particular period to have a leverage that is now at 26% that is the best in the industry.
So I think that, that is very for me, it's a very important signal. So that means that the fundamental, the structure, the basic elements of our industrial profile are absolutely robust. And that now I know that is going to be better. Also the price is lower, we are going to have a lot of new production. So I'm really confident about the future.
Now Massimo can elaborate on the M and A.
Oswald, I'm sure you understand that I cannot elaborate in detail on the disposal divestment plan. But let me say that up to now, we don't have any reason to revise our guidance in term of disposals even in the first. You remember the guidance we gave during our strategic presentation last March. In particular, we don't have any reason to modify the guidance related to the 1st 2 years. So what do we expect to divest in 20 sixteen-seventeen?
The process ongoing are, I understand, a bit complex, and we cannot announce anything until the final signature. But negotiation are ongoing, I would say, are very well advanced.
Next question comes from Mr. Biraj Borkhataria from RBC. Mr. Borkhataria, please.
Hi, thanks for taking my question. I had a couple on exploration. Obviously, that seems to perform better than expectations and you've upgraded the guidance there. I was wondering if you could just give us a quick run through on the key wells that you're drilling in the second half of the year. And as a related question to that, would any of the prospects you're drilling in the second half of the year be potential fast track options, which would imply potential upside to your production target?
Luca is going to answer for the exploration.
Okay. So in the second half, we will continue exploration near field drilling in Great Norus area, where we expect positive results coming. And this means that we could add peak production in a shorter time. As you see the ramp up of Nuros is really impressive what we achieved in 1 year. We will further continue uprising Zohr discoveries and we have some further drilling in Indonesia last quarter this year that could add some additional potential.
So we are optimistic about the guidance we updated.
Thanks. Very helpful.
Next question comes from Mr. Thomas Adolff from Credit Suisse. Mr. Adolff, please.
Good afternoon. I've got a few questions, and I want to go back to the disposal plan. And your target is €7,000,000,000 over the next 4 years, 80% of which is front end loaded. I know you said gas retail is not part of the plan. But then again, one of your competitors decided to include specialty chemicals in the plan when it wasn't initially because the market for selling upstream assets is obviously challenging and you don't want to leave value on the table.
So I guess my question is, is gas retail still off the table? And the second question I have, just I know you can't really go into details on your current discussions on Mozambique LNG on the disposal side again. But you previously said you were going to monetize 15% to 20 percent. And I believe the intention now is to monetize a little bit more than that. And I wondered why you are now planning on selling a bit more and whether you're also willing to give up operatorship if the partner is technically very capable?
And the final question on Zohr. You've drilled 4 wells. The 5th is ongoing. And I believe you said it's looking perhaps better than expected. So I wondered whether you're still sticking with your initial resource estimate.
Thank you.
So first point relating to the retail guys. First of all, we are not in the need now to sell the retail guys. We said at the very beginning that it should be done in an opportunistic way. So it's not we don't need now. We are more focused on the what we call do exploration.
So the diesel exploration asset where we found a large and giant field and a lot of research, and we have a high stake. So that is our priority. We are working meanwhile on the retail gas to make it more efficient and great area company and a diversified business. So we are going to look at that in opportunistic ways in additional upside potential that we have in our end. For Mozambique, we have been clear from the beginning that we're going to sell about 50% of our 20% or 25% in terms of percentage point, so 50% of our stake, and we are working on that.
Our model is to remain and keep the operatorship or keep, in any case, a clear control on the asset, the asset that we discover. We've also got other exploration blocks in Mozambique. We have a strong knowledge. We have been with Anadarko, the first company to deliver in this air that is a super green air it was. So that is what we wanted to do and what we want to continue to do.
Though we are not in a position to make any update on the resources, it's been, I think, very positive. The north of the block is, as you said, better than expected. But we're not now ready to deliver new figures.
Next question comes from Ms. Jaime Hirona from Societe Generale. Ms. Hirona, please.
Thank you. Good afternoon. I had two questions, please. Firstly, on Valdagri, the plant was stopped and you then say that you worked on upgrading it
and you will restart it very soon.
I wonder if you can share with us what I'm just wondering if there's any read through for other operations, if there's any systemic risk or was this a one off completely? And my second question is on the reorganization you announced today of internal control and risk management. I wonder if you can share with us what sparked the reorganization and what your objectives are in this?
Before that, Doug, the reason was linked to the water injection, some interpretation of the water content. We expressed clearly our position. We are using, we used, we are using we are going to use international standard. So I exclude that this kind of event can be replicated in other operations. What we have done is we just made marginal, so marginal changes to the our process for a different segregation of the water coming from the gas, but that's all.
And so I don't I think really that there's no impact because what we are doing in Bradesco is what we are doing and not us, but all the company are doing. In the all water injection in every field. So that is I don't think that is any problem. The reorganization is really a maintenance. We made 3 different kind of move.
The first one is the risk management integrated risk management that is reporting to me. It's been moved for a while with the CFO and now is we update the structure and now is reporting to me and that is my following the bylaws of the company is my direct responsibility. We have been a little bit more innovative for the compliance because we created a a central point for the compliance. And that is that means they we put together we are putting together the compliance all the different kind of units. And we are working, say, is an open exercise because it will be finalized in the next month.
At the moment, it will be with Massimo that with the human resources is working on these initiatives and before the end of the year, we reported to me. The third point is Versalis. So Versalis now is reporting to me. We are working very hard to create Versace. I think the first result in the last one half year are very successful because Versace first launched as a negative EBIT for 20 years and with some also negative cash flow.
Now in the last one and a half years, the EBIT is positive breakeven. And now for the first time, we are also free cash flow. That means that they made their investment and they have also a free cash flow. So we want to I want to follow very closely to finalize the transformation that started a few years ago. And for that reason, we decided with the Board to have this unit reporting to me.
Thank you very much.
Next question comes from Mr. Hamish Clegg from Bank of America Merrill Lynch. Mr. Clegg, please.
Good afternoon, gentlemen. A few quick questions from my side. First of all, just on cash again, we've heard from Shell already this week that it's all on schedule. Just wondered if you could give us a tiny bit of color on the commissioning. You mentioned earlier this year that it would be starting commissioning in the summer, in the summer months where
it's easier to install
the pipes. Love to get a very quick update. Secondly, on the Versalis, with the deal falling through, could you really tell us if Versalis is still up for sale now that we're including it back in the forecast and maybe why the deal fell through? Thirdly, just
on Gas and Power. Gas and Power tends
to be a slightly less volatile division within many of your peers, and we see quite a lot of volatility in earnings. I know the gas tariff arbitration is not ideal. But could you maybe explain a couple of things, which are, will this become more stable in the coming years as and when you reach the plan? And can you define what structural breakeven means? And then just finally, in the last question, I promise, on Zohr, one of the things I noticed is that you've recently been in negotiations with Cyprus.
And you also mentioned earlier on the call that the north of the block has been better than expected. Do we have any potential really across the opportunities outside the block and in Cyprus? Do you feel this structure maybe continues?
So Antonio, when I will answer about cash again.
So the pipeline rehabilitation activity are progressing ahead of schedule. And the overall progress as of today is 95% versus the 91% planned. So the entire pipeline, welding and laying has been completed, and we are closely to complete all the hydraulic test of the
pipe.
We anticipated to restart the production in October with a short ramp up to reach a plateau level around $230,000,000 of gross production within the end of the year.
So Versalis, I have to say that the future of Versalis is in the end of Versalis. What we are going to do with Versalis depends on what Versalis is able to do. I gave very straight and clear targets to Versailles. I want a company that is able to produce the cash to justify the investment. So that's reason now reporting to me.
We have a close contact with the management. At the moment, we consolidate again Versali's E and I. So that means that there's no discussion. That means that Versali has to demonstrate to be a company that is able to win the challenge and to get the result. And I saw that they are very motivated.
The last year was a year of negotiation. It's a wonderful company in term of proprietary technologies and market position and also optimization of products and competencies and R and D. I said that it's not our core business, but it's close to us in term of history. It's close to us in term of position and close to our refineries. And I want really to understand if they can get these results.
If you can get these results, then we'll see. So now in the next month, in the next year, the focus is to improve the efficiency and improve the results. For the Gas and Power, Konrad is going to answer your questions.
Thank you. You are certainly right in saying that Gas and Power seems always much more volatile than any other business. But I would like to stress one aspect that the impact of negotiation or arbitration or even portfolio like take or pay or recovery or take or pay is always giving a disproportionate effect on a single year when one of these events occurs, creating therefore somehow a mask to what is the underlying business activity. And when we say that we confirm our guidance for next year based on basically 3 pillars. 1, that is the good performance of the division that, as I said, is not really evident when you have lack of 1 offs of the size of the one that we had in this half of the year.
Then we are continuously working on bringing our cost of supply in line with the market prices. And we are controlling the optimization of our logistic cost. Those are certainly big objectives, but they are the objectives on which we are always working. And we believe that the progress that we have achieved so far is leading us in that direction. We hope that this amount qualitatively answer to your question.
Could you just on
that one bit, just define what structural breakeven means? So the
vertical means for us, we have basically aligned our I mean, 12 positive result from our commercial activity and to have aligned our supply gas cost to market condition. So even the future renegotiation became a maintenance and not a major turnaround as we are doing at the moment.
But is that breakeven? EBIT, cash flow, EBITDA?
We're talking about EBIT. In this half, I mean, our guidance for the cash flow even for this year is extremely positive. We will be just below EUR 1,000,000,000 and this without having cashed in the Gastera outcome of the arbitration, This is due to other initiatives that we have been able to put in place also as a remediation to that.
Okay.
And I think the last is Cyprus.
Yes, Cyprus. Cyprus, Indore. So we are discussing with Cyprus Authority. We are in Cyprus, and we are discussing with in the last period also because there is a bid round ongoing. So it's not because of Egypt.
As we said at the very beginning, we stated that when we talk about the gas absorbed, there is no any kind of overlap or any Egyptian growth structure that is in the Cyprus border. So that is quite clear. We are interested to work with Cyprus because we have 3 blocks and now we offer for other blocks as you know. So that is the reason why we are discussing with them.
Thank you so much. Next question comes from Mr. Massimo Bonizori from Equita. Mr. Bonizori, please.
Thank you and good afternoon, gentlemen. Three questions. The first on Nigeria, if you can give us some color on current production levels there considering the stoppages over the past few months? The second question on Venezuela. Could you give us an update on the receivable in the balance sheet there and some color on the situation in that country?
And the third, in the effect of on your midterm business plan of the inclusion of Versalis sorry to be back again on Versalis, just some number on the sustaining CapEx considering Q2 CapEx was pretty low. Thank you.
Antonio Verre is going to answer about Nigeria situation and production.
Recently, we concluded part of the retaining of the sabotage we have got last couple of weeks. The gas to the Nigeria LNG is on stream regularly as volume on the gas sales agreement. The oil production is ramping up slowly and we hope that no additional sabotage to come on stream again in a month from now. You want to say something also about Venezuela? Okay.
So in Venezuela, mainly we are talking about Cardona Perla Field. As you know, it's in production since last year. And concerning the delay on payment invoice, we are negotiating with PDVSA. We are in Atlanta stage on a securitization agreement. And the securitization agreement have got 3 pillars.
1, the export of gas in Colombia, which we expect to deliver gas on the Q3 and the condensate production allocated to the joint venture and securitization is ongoing in the negotiation. We hope that by August September to sign these 2 securitization agreements and then our default will be resolved.
Now for Versalis, we have our Managing Director of Versalis and many other Ferrari that can answer the question.
So in terms of sustaining CapEx for Versalis for the remaining of the year, we are planning to have a number around €85,000,000 And this is, as Mr. Descartes was saying before, entirely covered by our cash flow generation.
Thank you.
Next question comes from Mr. Giuseppe Rebuccini from Fidentiis. Mr. Rebuccini, please.
Good afternoon, gentlemen. Thank you for taking my question. I've got three questions. The first is about the sensitivity you gave about the operating profit to the brand price. If we look at the second quarter results, that does not appear to be valid anymore.
Could you please give us some more insight about that or some additional color about this sensitivity? And the second question is a follow-up on Gastera. To be more detailed, if I may, will there be any P and L or cash flow impact in the arbitration? I mean, are you going to make a EUR 1,000,000,000 provision for following the result of the arbitration? The third question is, again, on the Gas and Power.
Could you please give us a bit more color about the negative performance in the Q2 in particular, maybe looking at the different parts of the business, retail, midstream, LNG and so on?
So, Josep, about the sensitivity, on annual basis, we can confirm as far as the brand sensitivity, every dollar in change, plus or minus, would represent a reduction increase of around EUR 200,000,000. I'm talking about the cash flow effect. In term of thermos, so our refining margin, every dollar changed would represent a change in our cash flow of around EUR 100 and 70,000,000 in term of cash flow. On top of this, much, much more difficult to be predicted, there are changes also on the gas price because one of the reason why we have lost some cash in the first half this year has been the drop in the up price in Europe and mainly in Italy. So our gas production in Italy is sold based on this price.
And also the Libyan production that come to Italy, some way, is affected by this change. I don't have a precise number of this, but I will say that this effect applied to the first half would be in the range of well, it's around EUR 300,000,000 €300,000,000 of negative effect. Just to give you the reference number in terms of gas price and to give you a guidance, we are talking about PSVUSO and AB Italian price that 1st semester was EUR 246 per 1,000 standard cubic meter. In the 1st semester 2016, we registered EUR 154 per 1,000 standard cubic meters.
The award of the arbitration on the Gastera 2 contract was in June, and all the potential impact on 2016 has been reported in the first half result. And therefore, we don't have anything to consider for the 2nd part of the year. About the performance of Gas and Power on the Q2 compared to Q2 2015, we have a lower result for about EUR 160,000,000. But if we consider that this year, we had a much lower positive impact from retroactive factors or one off factors like we had last year basically for makeup gas and for undeliveries from our suppliers. This difference between the two quarters is €92,000,000 And this difference doesn't come from retail because retail activity was substantially stable between the 2 quarters and of the 2 years.
But it comes from midstream and this is almost all related to the decrease of the LNG price that we had this year across the international market. And the fact that for us some of our sales comps that were signed few years ago in the Far East had expired. Overall, these components also play an impact in the first half result. But if we compare first half to first half, we will be actually again removing the one off and the retroactive effect basically substantially unchanged with last year.
Okay. Thank you very much.
Last question comes from Mr. Rob West from Redburn. Mr. West, please.
Okay. Thanks. I'd like to ask 2, please. The ramp up at Neuromf is quite significant volumes coming through there. And I have to confess, I don't actually know much about the mechanics of that project and what you're doing.
I was hoping you could spell out a bit. Just what is the actual work that has to take place to ramp those volumes further? I'm clearly using existing infrastructure. If you could just give us more of an idea, so to get the sense of the cost associated with that, that would be great. And then secondly, just got one on Iraq, where it looks like there's also a higher contribution of volumes there.
Could you split that out for us in terms of what's ongoing TSC volumes and whether there was any cost recovery barrels coming through that number and how you expect that to evolve over the remainder of the year?
Well, I tried to give you an answer about Neuruse. You said that we didn't say a lot about Neuruse because Neuruse was so fast that we didn't have time to talk about it. So it's really a very fast project. But that is coming from our strategy. So we said and that said, we said 4, 5 years ago that we want to go conventional, we want to go close to our facility, we want to discover oil and gas that can we can find and put in production very quickly.
We don't want to have a stronger resource that's super giant that we take 40 years to take in production. That is the result. This new big field has been discovered at the same time of Dror. Dror was so big that and nobody talked about Noussmenurus, very quickly, there is shallow water. Shallow water is more offshore, but has some also some horizon onshore.
It's now something that you grow very quickly. The wells are very, very, very fast. We have already all the facility, Abu Mali facility, other facility close to that. So the project is very easy because you have just to drill well, drill a well that takes a few weeks, 1, 2 weeks, and then you have to complete the well and lay down the pipe. And sometimes you have a ready pipe because the grid is very present there.
And then you reach very quickly, a few kilometers, the existing facilities. Now we saw with half Tcf, 1 Tcf, then 2 Tcf now. 3 Tcf now in the second, go further. And also in the future, the future development will be very easy because also if you have to start with the first platform and then use other existing gas terminal, treatment terminal. You have to remember that in any situation where you see similar in Congo, we discover NNE and we realized the plasma and we started production after 7 months.
So I think that we got now very good skill in this fast track development. Costs are very low. Yes, costs are absolutely low. Remember that our exploration cost for this year was set at $2.2 per barrel. And now we are at the moment, our cost per barrel is €0.60 because we discovered a huge amount of reserves.
And the result that we discovered are already in production. Nurostad is production in September, discovered in July last year. And as I said in the presentation, in October, it's going to produce $130,000 per day. That is the reason why we could compensate very quickly for the aggregate. That is the reason why we can confirm our value.
So the project will be developed in this way. For sure, we are going in the next phase, but in parallel and with the existing cash flow to develop process platform, We already have also the gas treatment system. I think that we're going to have a very, very good news and very good return, and we have to consider that it's not just is the right gas, so we have also come and say. So that is really in brief the story of
Thanks for the story.
And now after the story of Nourous, now Antonio will talk about the story of Iraq.
Yes. Thank you. So the Zubere production today is moving between 340,000 to 150,000 barrels per and 50,000 barrels per day. And concerning any payment for Eni, I think we have no overdue and we are recovering we already recovered the quarter 1. We are already on planning to recover the quarter 2 and then we're proceeding for the 3rd one.
Now things are moving quite well.
If my line happens to be still open, just could you address that specific question around is there cost recovery coming through that volume you're booking right now and maybe say how big that is?
Dan, it's very simple. As you talk about Iraq as a PSC, it's not a PSC. It's a service country. So we cover our cost, then we added a fixed remuneration that can stay between $1.6 $2.2 per barrel. So that's all.
So the split is very easy to do because we have a baseline. And above the baseline, it was $180,000 per day. Above the base line, you made the difference. And that you applied $2 per barrel and the rest is to recover your cost, but it's not PSE.
Right. I said I think I meant TSE as in technical service.
Sorry, I
didn't So the contract
I wasn't clear, but I'll take
that one offline. So thank you.
Okay. Thank you very
much.
Okay. If there is no other questions, thank you very much. No other questions?
Yes. I'm sorry, sir. There is another question, the last, I hope. No, I'm
sorry. Why you're off?
No, I'm very sorry. I used the bad word up until now. Mr. John Rigby, I'm sorry. Mr.
Rigby, please. Thank you.
Yes, thank you.
I knew it was me. That's what she was saying. She hoped it was the last question.
Can I just a couple of
follow ups? Just on Mozambique, can you just confirm or describe the mechanics between your intention to sanction the floating LNG, I think, in the second half of this year? I think you said 3Q actually before now. And the sales process, are those 2 interlinked in any way? Is one contingent on the other or the other way around?
And then just to go back on cash again, that ramp up, which you indicated until the end of the year, are there any plans to take the field down again next year for any kind of maintenance or whatever sort of shakedown or anything happening? Or can we expect it to move reasonably evenly up to plateau and then hold?
Roberto Casu is going to answer about Mozambique and Antonio about Cascakao.
Well, actually, there is no link between sale process and project activities. Project activities are progressing on both fronts, the offshore with Coral South floating LNG project and the onshore. As you said, we are targeting the FID by the end of 2016 Q4 and this process is well advanced. So it will continue while the other exercise is taking place.
Luca, again, as I told you, 230,000 barrels gross production will be reached by the end of the year. And therefore, we will going to stabilize production for a few months to allow the partial depletion of the field before the startup of the gas injection on mid-twenty 17 to reach the full field plateau. As you know, 370,000 barrels oil production. We don't expect any shutdown during 2016.
An exit rate for 2017 would be at the sort of nominal peak, the 370 for the experimental phase?
Yes. Mid-twenty 17, we will reach 370,000 oil production.
Brilliant. Thank you very much.
Thanks.
No more question at the moment.
Okay. Thank you very much. Thank you to all, and we have closed the conference call.
Ladies and gentlemen, the conference is over. Thank you for calling Annie.