Afternoon, ladies and gentlemen, and welcome to Eni's 2016 First Quarter Results Conference Call, hosted by Massimo Mondazzi, Chief Financial and Risk Management Officer. I'm now handing you over to your host to begin today's conference. Thank you.
Thank you very much. Good afternoon, and welcome to our Q1 result presentation. Economic result and cash flow are presented as we did at the end of 2015 on a standalone basis. This means that Solis is excluded both in 2015 and 2016 and Saipem is excluded in 2015 and equity accounted in the Q1 of 2016. In this quarter, we continued to perform in line with our strategy, progressing in all our businesses and delivering positive operating result in each of them.
In particular, in E and P, we achieved as planned the start up of GOLAT in Norway, Heidelberg in U. S, Punj in Block 1506 in Angola and Melayadip in Egypt. This, together with the contribution from ramp ups, contributed to a volume growth of 3.4% versus 4th Q1 of 2015 or 1.3% net OPSA effect. Development activities are progressing well. We confirm all the start ups we planned this year, including Kashagan, which is expected on stream within the last quarter of this year.
Talking about Zohr, after the final investment decision taken in February, we are preparing the 4th well, while speeding up the award of main construction contracts, both on and onshore. As far as exploration, we drilled 3 successful wells and other positive results are expected in the Q2. In terms of guidance, we are very well on track to exceed the early guidance of €400,000,000 BOE of additional resources at a cost of around EUR 900,000,000 or less. In mid downstream, all segments were profitable, achieving around EUR 350,000,000 of EBIT, thanks to, in Gas and Power, a good quarter in a weak scenario that confirms the turnaround pace of this business that was driven by the improved competitiveness of our gas contracts and good result in retail. In Refining and Marketing, good performances in both Refining and Marketing, the former confirming the expected 2016 breakeven at the margin of $4.5 per barrel.
Overall, the company generated operating cash flow of EUR 1,300,000,000 at a very depressed scenario of $34 Brent and kept leverage almost flat at 23%. Before entering into the performance of the quarter, I would like to focus once more on our upstream portfolio, taking advantage of our peers group complete set of numbers already issued either through the 10 ks or 20 F files. The specific subject is the disclosure made Standardized Measure of Discounted Future Net Cash Flows. The reserves value disclosure, together with its comparison with the peer group, provides some very powerful information about expected cash inflow, outflow and net value of the different portfolios. And when the scenario drops dramatically, as it did in 2015, the variations gives a comprehensive view of portfolio resilience and reflect the action taken to cope with this depressed scenario.
Looking at the reported numbers in a dollar per barrel terms, Ennis portfolio was the 2nd best last year when a $1.01 per barrel oil scenario applied, just behind 1 U. S. Major. And in 2015, with the reference oil price halved at around $55 per barrel, our portfolio becomes the first one, confirming the strength, both in high and low environments, of our conventional and low cost assets exposed to PSA. Thanks to this, in terms of absolute dollar value, our portfolio now ranks 4th among our peer group, coming ahead of companies with proved reserves volumes, which are much bigger than ours.
And we expect further announcement in this metric looking forward, either in the short and medium term, thanks to projects that will contribute highly valuable additional reserves in 2016, such as Zohr in Egypt and other recently made giant conventional discoveries later on. And now a few comments on the quarter's economic and financial results. Q1 adjusted operating profit amounted to EUR 472,000,000, around EUR 1,000,000,000 lower than last year. This drop was driven by a negative scenario mainly referred to upstream, which accounted for around EUR 1,600,000,000 partially compensated by our stronger industrial performance that improved by €600,000,000 All our businesses recorded positive adjusted operating profits, reflecting the progress of our turnaround programs. The adjusted net loss amounted to €77,000,000 and was penalized by the already anticipated higher tax rate paid on positive result in mixed with some negative result in concessions, which are subject to lower taxation.
In E and P, hydrocarbon production was 1,754,000 bp per day, 3.4% higher compared to the Q1 of 2015. Excluding PSA and other minor effects, production increased by 1.3%, mainly thanks to the startup of Goliath and production ramp ups in Angola, Congo, Egypt, Venezuela, USA and Norway. Operating profit was affected by the decline in oil and gas prices, which accounted for EUR 1,500,000,000 versus Q3 of 2015, but partially counterbalanced by €500,000,000, arriving from lower exploration, DD and A and operating costs. 2016 production guidance is substantially confirmed even if we assume a Balbaghri shutdown due to the current legal investigation lasting for the full year. The negative impact in this hypothesis would be in the range of 50,000 bureaus per day, but it could be substantially absorbed by the production contingency and the expected better performance in other fields worldwide.
The timing of the legal procedure in Valdagri cannot be predicted today. In Gas and Power, the scenario was depressed. TTF and PSV were down both versus 4th quarter and Q1 of last year. And also the spread between the 2 ups narrowed to around $0.50 per 1,000,000 btu. Gas demand in Europe was lower than in the Q1 of 2015 due to the mild winter and high output of renewables in the power sector, particularly in Germany and Spain.
In this scenario, the adjusted operating profit amounted to EUR 285,000,000, almost in line with the Q1 of 2015, despite the warmer weather and lower positive nonrecurring items for around EUR 100 million, inclusive of the effect of the Edison arbitration currently under further renegotiation. This improvement has been achieved thanks to the upgrade of our gas portfolio renegotiated so far, lowered logistic cost and trading activities. In term of guidance, we confirm a positive adjusted EBIT in 2016, thanks also to the retroactive contribution of Gasper arbitration forecasted by the Q2 this year as well as the structural breakeven from 2017. Turning now to R and M. This business, excluding the effects of significant decrease of refining margin from $7.6 per barrel to 4.2 dollars showed an improvement year on year with an adjusted operating profit of €66,000,000 In particular, refining has benefited from the ongoing progress on-site turnaround with an adjusted operating result substantially at breakeven.
This is notwithstanding a capacity utilization rate, which was down 9% points versus Q1 of 2015 at 87%. This was due to higher maintenance activities triggered by a weak scenario. While marketing has been better than in the Q1 of 2015, benefiting from higher retail margin in Italy. We confirm our target for a 2016 refinery breakeven margin at around $4.5 per barrel, on track with our program of lowering it to $3 by 2018. Finally, our financial position.
Net debt at the end of March was EUR 12,200,000,000 implying an almost flat leverage at 23%. The EUR 500,000,000 increase in debt versus year end 2015 is attributable mainly to the capital expenditure of EUR 2,500,000,000 counterbalanced by cash flow from operation of EUR 1,300,000,000 cash in of EUR 340,000,000 from the conversion of the latest Snam shares that occurred in January and the effect of euro appreciation on U. S. Denominated debt of around EUR 250,000,000 All businesses, apart from E and P, contributed a positive free cash flow in this quarter. For the full year, we confirm our guidance to cover CapEx at $50 per barrel with our cash flow from operation.
Thank you very much. And now let's start the Q and A session.
Thank you. First question comes from Mr. Clint Oswald from Bernstein. Mr. Oswald, please.
Yes. Thank you very much, Massimo. Two questions. First one, just on the Valdezri oilfield.
Sorry, could you please speak louder, please?
Can you hear me?
Not very good, but speak louder, please.
Okay. Okay. Can I ask please about the Val Daghri oilfield? Can you say what is the cash flow per barrel typically from that field? I imagine it's a high margin field, but if you can give us a sense of that.
And kind of also, is the cash flow offset from that field going to be offset by the higher production that you're talking about with the rest of your portfolio? So that's the first question. 2nd question, I wanted to know about your gas business in Italy. You talked about more spot sales in Italy. Can you give us an indication of the typical price, the gas prices you get for Italian spot sales, please?
Thank you.
So I'll give you the answer to your first question, and then I'll leave the floor to Humberto to answer the second one. You can imagine, I won't like to give you a precise number about cash flow from Valtagri because of some reason. But yes, I agree that I agree with you that on a quantitative terms, we are substantially confirming the production guideline. What I could say that certainly, the value of oil produced in Valdagri is a bit higher than the average. So all in all, we expect a sort of penalization that will last as long as this stop in Valladagri will take place.
And then I leave the floor to Humberto to answer the second question.
Thank you. As Massimo said, we had a positive performance in the quarter on the commercial activity, both in trading and in managing control of our logistic cost. To answer directly to your question, when we when you refer to spot sales in Italy, I think that you referred to 2 possibility. 1, that are the sales to the hub and therefore, the sales are linked to the PSV price. And of course, the flexibility is not an element attracting more value if we can offer it being a sale at spot level at hub level.
When we do spot sales to other customer like industrial and commercial customer, We structure our price around the product where the flexibility that is embedded in our portfolio potential is a settling of the value, and this is where we extract the premium compared to the hub.
Okay, okay. Thank you.
Next question comes from Mr. Biraj Borkhataria from HSBC. Mr. Borkhataria, please.
Hi, thanks for taking my question. I had a couple. Firstly, on Gas and Power, obviously, a strong quarter. I was wondering if you could break out the moving parts, one offs and sustainable parts between your logistical improvements, the renegotiations and importantly, the trading part and any benefits you had there in the quarter? So any color on that breakdown would be appreciated.
And the second thing was on your resource additions guidance, you're hinting to an increase. I was wondering if you could just remind us what the key wells are to be in the next couple of quarters that you're going to drill? Thanks.
Thanks. So I'll give you the answer to the first question, and maybe I'll leave the floor to Antonio Vela to answer the second one. So I would say the majority of the contributors to the current Gas and Power result are structural, stable. So what we are talking about are lower logistic cost. Definitely, we are benefiting from a better performance of the gas portfolio that has been renegotiated starting from 1st January of 2015 or so recorded in the Q1 2015.
The only I would say, the only non stable contribution should be considered the trading part of this result, because definitely, the stronger variability we have seen in the Q1 definitely contributed to a better result. But just to give you an idea, we are talking about a contribution in our case of around €40,000,000 So we are not talking about the significant extraordinary component of this result. At the same time, we had negative comparing the Q1 of 2016 versus Q1 of 2014. And definitely, we recorded something in the range of EUR 100,000,000 of terms of higher retroactive effect we recorded in 2015 versus 2016. One of these, I said during my speech, relate to the Edison contract.
You remember, we had the final judgment, the arbitration end of 2015. But the contract is today is again under renegotiation, and we expect an outcome in the Q2 this year. So Q2 should benefit from the negotiation of this contract, the effect of which should begin 1st October 2015. And then always talking about the negative, the LNG market is, I would say, less strong than it was in 2015. And this penalized the result in the comparison 2016, 2015.
So all in all, the positive and negative has been balanced and the positive with the only exception trading are structural 1. I think I gave you a comprehensive answer. And then I leave the floor to Antonio to answer the second question.
So we have an average of production of new project of 275, where 187,000,000 are coming from ramp up and EUR 88,000,000 from the startup. Within the startup, as Massimo mentioned to you, we have Casa Grande and GOLLET, which has been already achieved. But in addition, that recent week, we introduced additional well in production in Egypt in Idoko, which we expect an additional ramp up of production for the second quarter.
I was more wondering about the discovered resources target and the upside there.
Yes. In fact, Nidoko is one of that and Goliad also, because as you know, the ramp up in Goliad went up quite quickly and we'll confirm our production. And the appraisals on Hidocco are growing up. And also Zohr, as you know, we successfully concluded the 3rd well and the 4th is already in drilling and probably by May, we'll have additional resources on that.
That's great. Thanks.
Next question comes from Mr. Amish Kleger from Bank of America. Mr. Amish, please.
Hi, there. Thanks for taking my questions. Mr. Mondherzhi, a couple of things. First of all, just wanting to note this is, your realizations were a bit lower than normal this quarter trading at a 16% discount.
Was there any reason by PSAs for that? And can we see it normalizing to the sorts of optimizations we've seen previously? Also secondly, on a similar vein, your refining margins appear to be sort of slightly tighter to my benchmark than they've been previously as well. Is that a function of the continued efficiency? And thirdly and finally, on cash again, you reiterated the start up by the year end.
I've read somewhat in some places that certain sources think that cash again is more likely to start up next summer just because of the implications of starting to field up in the winter months. I wondered if you could share with us what gives you the confidence that despite the winter months, it would be good to start the field up at a time you plan?
Okay. Starting from the last question. Yes, we are confirming our projection that is the projection of the old joint venture. I would like to say that the news that appear on the I don't remember on the web, on the papers was a declaration released by a Chinese guy that has been withdrawn later on. So I would say it's been a mistake.
So definitely, the joint venture is stuck in reaffirming the startup foreseen end of this year, Q4 this year. In term of realization, no, there are no any particular effect, neither related to the PSA. And as well as I don't have any kind of specific information about the refining throughput. Maybe Alberto from R and M division could elaborate a bit more on this. Our refining benchmark, as you
know, is refining reflecting our exposure to the throughputs of our refineries. 80% of our refineries in the Med, 20% is in Germany. When you compare this benchmark to the other majors, obviously, you have to take into account that other companies have a higher exposure to the S or Eastern for Eastern areas, where in general margins have experienced a higher level. In terms of general exposure of our downstream refining business.
Thank you very much for your answers.
Okay. Thank you.
Next question comes from Ms. Irene Himona from SG. Ms. Himona, please.
Good morning. Masimo, I had 3 questions, please. Firstly, in changing the accounting from full cost successful efforts, obviously, you revalued the assets and the uptick. Can you give us some guidance on the new basis, what annual DD and A charges can we expect, please, in E and P and for the group total? Secondly, if you can please update us on asset disposal sort of progress.
You had about €800,000,000 in Q1. Are you on track, do you think, for the full year target on disposals? And then finally, can you say if the R and M results includes any material trading profit, please? Thank you.
Okay. So I'll start answering your question about the successful FOMETO. So the most important numbers I remind to qualify the application on new accounting principle are the following, Irina. First of all, the increase in the net equity that 1st January 2016 is in the range of EUR 3,500,000,000. That's because the capitalization of the past exploration fully expensed following the previous accounting principle and now capitalized waiting for the final assessment.
In term of effect on the P and L, it's quite difficult because it depends on your rate of success in the exploration you are performing. Our projection this year should be something in the range of EUR 100,000,000 of an advantage as a mix between the incremental DD and A and, I would say, the exploration capitalized has incurred. As far as asset disposal, I would say, yes, we feel we are on track in implementing the disposal plan that we just announced during our strategy presentation. We said EUR 7,000,000,000. We said fronted loaded.
It means more or less EUR 5,000,000,000 in the 1st 2 years. As I said during the presentation, negotiation are underway. Some of them are very well advanced. So no reason to modify the guidance on this respect. And 3rd, in Refining and Margin result in the Q1, maybe I leave the ground to Alberto again to give you the answer.
No hedging strategy was implemented in 2016 up to now. Whilst as you remember, there was a strategy of hedging activated in 2015. And in the Q1, the impact of that strategy was a negative €45,000,000 Yes,
but the trading you asked about the trading.
No trading results contributed in numbers of R and M.
Thank you very much.
Next question comes from Mr. Massimo Bonizoli from Equita. Mr. Bonizoli, please.
Thank you and good afternoon, Massimo. Massimo. Two questions. Back on Voldagari, could you give us some color on the effect of the production suspension on your refining business profitability? Turning to refinery should be the one affected.
And also if you're evaluating any countermeasures both for upstream and downstream. The second question is on Versalis. If you can could give us some update on the disposal process and some color on the timing, please.
Okay. As far as the effect on downstream related to the shutdown of the upstream production, but definitely, while in upstream, there are no countermeasures that could be applied because the I would say, the stop in production doesn't allow us to produce even 1 barrel. In as far as the refinery, we can change the oil supply using, I would say, our supply system worldwide. So we can buy oil and keep the refinery running with just, I would say, minor deoptimization in economic terms. So definitely, the bigger issue relates the upstream.
As far as Versalis, we said during the start of the presentation that Versalis is in the disposal plan that we announced. Again, negotiation are running and sorry, but I can't give you any color on this. Okay.
Thank you anyway.
Next question comes from Mr. Mark Koffler from Jefferies. Mr. Koffler, please.
Hi, everyone. Thanks for taking my question. Just one, please, on the upstream. And I noticed the gas production from the Americas continues to ramp up, which I assume is largely driven by Venezuela. I was hoping you could offer a bit more color both in terms of the receipts in terms of payments, if there's been any change there in Venezuela?
And then also maybe if you could add any color to what you're actually seeing on the ground given what we've been hearing from some of the service providers in country? Is it still possible to continue with business as usual there? Thanks.
Okay. So certainly, the situation in Venezuela is critical. You see also on the newspaper. Up to now, we have been paid by the country. The production just, I would say, started up, and we are now testing the securitization tools that has been agreed to have certainty about the payment.
I'm talking about securitization that relate the liquid production from the field, together with the possibility to export to Colombia part of this gas being paid in U. S. Dollar. Definitely, what we expect is a tough period in country. So on top of what we negotiated, maybe there could be some delay in payment.
We are envisaging some delay in payment. We are not talking about huge numbers, because we are only in the first phase of production. So numbers we are talking about are not numbers that could jeopardize our expected cash flow. And I think I answered your question.
Yes, that's great. Thank you.
Okay.
Next question comes from Mr. Thomas Alof from Credit Suisse. Mr. Alof, please.
Hi, thank you very much. Two questions, please. Just one on going back to disposals, obviously, key to rightsizing your exposure to certain projects. My question isn't really on what progress you're making there, but more specifically on a potential structure in Mozambique. And I guess my question is, since you're committed to lower it from 50% to whatever I can't remember whether it's 25%, 30%.
But on the structure, my question is, if you were to keep operatorship for Coral FLNG, would you be happy to give up operatorship for the main Bamba development to whoever you may farm the project out to. And if that's really the case, it would imply that the equity stake you consider selling is actually more than the 15% to 20% you talked about. That's question 1. Question 2, again, more specific to a country, and that's Iran. I understand the past has been far from pleasant and the future there is quite unpredictable.
But you seemed ENI seem to have been one of the few Italian companies that has not signed an MoU when Prime Minister Renzi had a meeting with Rouhani. So is that a reflection of your appetite towards Iran or the opportunity that you see in Iran being not so attractive? Thank you.
Okay. So as far as Mozambique, I would say, Thomas, part of your question is part of the ongoing negotiation. So I cannot give you specific detail on this. But let me comment and please understand what I'm saying. This contract is so big, so huge that I would say, I guess, we could definitely take advantage from the contribution of a stronger additional partner, not only stronger on a financial point of view, but even on, I would say, capability to run such a complicated project.
So we see it as an advantage, definitely not a constraint to get the final result, I would say, the disposal that we are projecting in our plan. And second, Iran, you're right. So we didn't sign any MoU. Two comments on this. First of all, generally speaking, we commented a lot of time that we discovered so many resources all around the world that definitely the appetite must be measured on this amount of additional resources that has been found in term of quantities and in term of, I would say, contractual terms.
On this respect, we cannot comment about Iran because we don't know the contractual terms of the new mineral contracts in Iran. We together with all the other oil and gas companies are waiting for these, I would say, main terms. I guess that it will take some time in order to understand and possibly negotiate. Any decision on our side will be measured with what we already retain in our portfolio.
Perfect. Thank you very much.
Next question comes from Mr. Neil Morton from Investec. Mr. Morton, please.
Good afternoon. Thank you. I have two questions, please. A number of companies have reported a slow CapEx start to the year. Euro seems to be running ahead of guidance.
So I know you've reaffirmed 20% reduction for the full year. Can we still assume around €9,000,000,000 number in terms of modeling? And then just secondly, I think there's been a little bit of confusion this morning around the sort of deconsolidation of Versalis. I was looking at Page 28 of the press release. Can you maybe perhaps explain why there's little difference in the revenues in terms of intercompany transactions?
Yet there seems to be a big difference in the profit of Versalis. Thank you.
Okay. So in terms of CapEx, yes. So we recorded EUR 2,500,000,000 in the 1st quarter, slightly more than the average per quarter to come up with EUR 9,000,000,000, EUR 9,500,000,000 that remain our guidance by year end. So we are confirming the reduction by 20% we announced during the strategic presentation, reduction of 16% versus 15%. As well as, Neil, we are confirming our guidance to cover this amount of CapEx with cash flow from operation based on $50 Brent.
And as far as Versalis, probably I need a bit more time to address correctly your question. Maybe Francesco could give you a detailed answer. But talking about the content of the press release, probably if you go to Page 22, you will have a very straightforward answer. Page 22, you see the real chemical contribution that now is recorded as discontinuing operation. I'm talking about the you see EUR 119,000,000 adjusted operating profit recorded by the Chemical business in the Q1 2016.
But looking at this report, you probably understand better what is what's confusing some people because the way the ASK number 5 required representation of this discontinued operation definitely is not easy to be understood. You understand about the consolidation adjustment that creates some confusion. You see EUR 399,000,000 that are the intercompany cancellation of items that relate mainly Versalis. That's the reason why I mentioned this, because this number relate to mainly the virgin naphtha, all products that you and I buy on the market and sell to Versalis that IAS No. 5 required to be canceled in the representation between continuing and discontinuing.
But we sum up again when we represent the so called standalone representation because in the assumption that Versali would be sold in the future, the revenue we are canceling today in this way would represent the number will be definitely a net revenue for ENI. I hope I answered your question.
And just to confirm, there's no transfer pricing between Praustallis and the rest of the Eni group? Is that
No, there is a transfer price, but it's a fair value transfer price. So we assume exactly the same result if and when Versalis would be sold in the future.
Great. Thank you.
Okay.
Next question comes from Mr. Rob West from Redburn. Mr. West, please. Hi there.
Thanks very much. Can I ask 3?
We can't understand you.
If I talk slower, is that a bit better?
Louder.
Okay. But question 1, what is the receivables balance from Venezuela today? Question 2, when will you reach 100,000 barrels a day of production at Goliath? And what are the challenges or bottlenecks on the SDFO to get there? I think there's just some questions around gas injection and some of the electricals.
I was hoping, please, could you comment on that? And then the third one is we last time we reported and today, we've had 20F release. And in that, I always look at the development wells drilled. It runs about 190 wells in 2013, 190 wells in 2014 and then a quite big pullback to 130 wells in 2015. My third question is, is that 130 wells per year a sustainable number?
Do you need to increase that to avoid your decline rate going up? Thank you.
Okay. So the out standing today in Venezuela, if I not remember if I remember well, it's less than EUR 100,000,000. And as far as the number of wells, I would say, this is the plan we are pursuing. It's fully current. We said that out of the development CapEx, more or less EUR 2,000,000,000 each year are devoted to counterbalance the natural depletion.
And the overall effect is the production growth that we declared that we are confirming today. So I guess it's not just a matter of how many wells we are projecting or we drill in 2015. So I think that the relationship is much broader than this to measure the final effect. And then I'll leave the floor to Antonio to answer about the Golar Arapapa.
Thank you.
So the ramp up of Goliad is ongoing. As you know that we just been working on the gas injection, which recently working quite very well. And in fact, yesterday, we reached the production of 74,000 with the full injection gas. So definitely tuning is ongoing, but definitely the ramp up will proceed as you know up for 100,000 barrels constant.
Thanks. Can I just ask just to make
sure I understood you correctly on that prior question, do you think you can maintain drilling at 130 ish wells per year? That's an ongoing number.
So 130 well, that doesn't mean doesn't mean we have a production prediction per well. If we are better performing on those number of well, we will have a bigger ramp up and why not the lower wells, whatever is coming first. It's clear? Thank you.
Next question comes from Mr. Nitin Sharma from JPMorgan. Mr. Sharma, please.
Afternoon, gentlemen. Two questions. First one, Massimo, when you presented in March earlier this year, you flagged the distinction between tax rate on adjusted earnings and cash tax rate. And I think you guided towards mid-30s for the cash tax rate. Now if I do a simplistic calculation for Q1, I end up with a slightly higher or significantly higher cash tax rate.
So could you maybe confirm that guidance still holds and maybe give us what cash tax rate was in this quarter? And the second question is on Libya. Now clearly, your performance in the country has been very good. Do you expect any further improvements in Libyan contribution if the conditions were to improve on the ground, I. E, National Unity government formation?
So maybe some thoughts on Libya, please. Thank you.
Okay. So talking about the cash tax rate, yes, you're right. In the first quarter, we recorded a cash tax rate a bit higher than the yearly guidance. So we recorded something in the range of 35%, while the early guidance was lower than 30%. The early guidance is confirmed.
So we expect full year tax cash tax rate below 30%. As far as Libya, the production contribution today is in the range of 340,000 per day. We really we do not expect any increase, notwithstanding the better condition that we see in place in country today.
This is the last question. Last question comes from Mr. Ralf Martin from Morgan Stanley. Mr. Martin, please.
Hi, hello. Thanks for taking my question. I wanted to ask you, Massimo, I just wanted to follow-up on Niels' earlier question with regards to these sort of these reinstatement line items and elimination line items. I understand that if there are transactions between the standalone R&M business and the discontinued Fresalas business that there is some sort of revenue cancellation. But it's not just that you're canceling revenues.
You're also you're canceling profits and quite a lot of them. You make it sound like one part of the company buys something for another part of the company and we're just canceling something out. But there was a profit cancellation of €399,000,000 So I was hoping you could say a little bit more on that. And the second thing I wanted to ask you relate to some press reports about the potential disposal of the retail gas business. I was hoping you could give us an update on how that is progressing.
Thank you.
Okay. So I understand that understanding the IAS number 5 reporting is quite complicated. I'll try to give you some detail on this. No, we canceling the intercompany doesn't mean to cancel the just the profit. It means really to cancel the revenues because the accounting principle required the cancellation of the intercompany, in this case, revenues between the continuing and discontinuing.
That's the reason why if you see the continuing operations stand alone, because the reason to see just the continuing operation means to figure out the numbers as they will be after the disposition of what is under disposition. So Saipem, Dunn and Versalis ongoing. But if you take just this way to represent and you ignore that Eni is buying, so costs are recorded in Eni numbers. Acquired Virgin NAFTA on the market to be resold to Versalis and the reselling is canceled. Definitely, you are piecing a quite important piece of the overall information.
That's the reason why we created this, I would say, standalone way to represent the continuing operation. Just to give you the full picture of what it will be after the disposition of Saipem and Versali. So the number you see, I mentioned this table, Page number 22 in the press release. These numbers, the EUR 399,000,000 that you see is canceled under the discontinued operation and then restated to create the standalone view represent mainly exactly the effect I just told you. As far as retail Gas and Power, there is no process ongoing today.
All right. Okay.
Perhaps I
need to go back to my accounting books. But do you expect this to continue in the next couple of quarters then? On a similar line item?
I'm afraid, yes. Okay. We'll do our best to give you, we say, upfront and much better view in order to avoid any kind of confusion. But we must cope at the same time with, I would say, the most clear and powerful representation and comply with the law because we cannot ignore that we have to respect the IAS number 5, I'm afraid.
All right. Thank you.
Okay.
No more questions at the moment.
Okay. Thank you very much all. Bye bye.
Ladies and gentlemen, the conference is over. Thank you for calling Annie.