Afternoon, ladies and gentlemen, and welcome to Annie's 2015 Q3 and Full Year Results Conference Call, offered by Claudio Discalci, 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. However, at the end of the call, you have the opportunity to ask questions. I'm now handing you over to your host to begin today's conference. Thank you.
Good afternoon and welcome to our 4th quarter and full year results presentation. In 2015, we successfully delivered important milestones to our strategy, exceeding all our main targets for the year. In the upstream, we had the highest production growth rate among peers. We replaced 148% of produced volumes and confirmed all outstanding exploration truck rates. In the mid downstream, we accelerated the turnaround of all our businesses.
Gas and Power is close to breakeven, confirming that we are on track to hit full year plan target. R and M is both EBIT and cash flow positive. Refining as a standalone has achieved EBIT breakeven 2 years ahead of plan, thanks to the reduction of our breakeven margin to about $5 per barrel. A major milestone of 2015 has been the dilution of the Saipem stake and the related debt repayment, an operation that has been completed mid week. This, together with the total exit from NAM and Galp and the ongoing negotiation aimed at reducing our ownership in the chemical sector confirms any transformation strategy to an oil and gas company.
Finally, the efficiency program, which we started well ahead of the decline in prices, delivered better than expected results. CapEx was reduced by 17% against the original guidance of 14%. OpEx by 13% against the planned 7%. And G and A cost savings amounted to €600,000,000 versus the guidance of €500,000,000 All these results led us to reduce our organic coverage of CapEx to $50 per barrel in 2015 versus the $63 per barrel anticipated in our 20 fifteen-eighteen strategic plan. Due to the deconsolidation of Saeta's debt and our operating cash generation, we managed to cut the leverage to 22%, the lowest value in the last 10 years.
Let's now focus on cash, the most important target in a downturn cycle. With an operating cash flow of 12.2 €1,000,000,000 we managed to keep our cash generation only 15% lower than in 2014, despite the 50% decline in the oil price. This cash performance, coupled with the reduction of CapEx to EUR 11,000,000,000 generated a net cash flow of EUR 1,200,000,000 Along with the disposals, this substantially covers our cash needs, including business. Compared to 2014, we offset almost 2 thirds of the scenario impact by increasing cash generation, thanks to production growth in E and P, operating cost savings, exposure to production sharing contracts, better performance in downstream segment and further improvement of working capital. And now we will give you additional details and guidance for 2016 on the main factors that underpinned these dynamics, production growth and core facilities.
In production, we grew 10% in 2015, doubling the initial target. Thanks to the flexibility of our portfolio, we brought forward to 2015 part of the production growth that we planned in the 4 year plan. This performance was due to 10 main start ups in West Africa, the Americas, Italy and the North Sea, the fast tracking of near field discovery in Egypt, the contribution of lithium gas fields, the one off contribution from Iran and Libyan cost recovery that account for $42,000 per day and PSA assets that account for 3.8% of this growth. For 2016, we will maintain the same production level as last year, excluding the contribution of one off factors. The key startups will be Goyak, Cascadhan and other mining fields in Angola, Egypt and Gulf of Mexico.
Let's now turn to cost. On CapEx in 2015, we achieved a reduction of 17%, thanks to the large optionality of our portfolio. We're facing more expensive and longer term projects in favor of the development of near field exploration successes, and we leverage the renegotiation on rates and tariffs of services, reducing the total cost by €500,000,000 In 2016, leveraging the same drivers, we will further reduce CapEx by 20% versus the last year, even including ore, which is set to become a major contributor of additional production to the full year plan, replacing longer term development. After 2 years of strict spending control and thanks to our focus on conventional and local space, we have materially reinforced the resilience and competitiveness of our ethane portfolio, while preserving our profitability profitable growth target. Upstream investing for barrels produced remains at the lowest level of our peer group, and this will be further reduced by 43% by the end of this year versus 20 fourteen's level to $14 per barrel.
Moving now to operating costs during 2016, we reduced OpEx to $7.2 per barrel, down by 13%, doubling the original target. Contract revisions, optimization of maintenance, lower energy feedstock prices and logistics costs are at the basis of these savings. In 2016, we plan to further improve and deliver an upper third barrel down to $6.4 per barrel, 23% lower than in 2014. Our commitment to cost efficiency is also strongly impacted on G and A cost. In this area, we beat July 2014 target of €500,000,000 of selling by 20%.
Non reduction has come from communication, logistics and ICT. These savings will be confirmed in the full year plan. And finally, I would like to highlight how we will continue to fuel our future. Last year, we discovered 1,400,000,000 barrels, 2 thirds of the 20 fifteen-twenty 18 plant target at a unique cost of $0.70 per barrel. We achieved these results through a very well balanced exploration activity that focused on specific targets, limiting our investment to EUR 800,000,000.
These resources, which were mainly discovered in North Africa in North and Sub Saharan Africa, are highly synergically with existing production hubs. Thanks to these discoveries, we will maximize the opportunity of our portfolio through the optimization of the development plan and the potential disposal of stakes where we have a high participating interest. In terms of the sales replacing interest, we achieved a ratio of 148% with around $7,000,000,000 of entirely conventional proved reserves. We have kept our Resource Life Index at around 11 years. This result does not take into account the contributions of Dror and Cora, which will be sanctioned in 2016.
And now Massimo will give you the highlight of 20 15 economic and financial results. Thank you, Thiago. First of all, let me remark that the pro form a group figures exclude Saipem and Versalis' contribution as they have been reclassified as available for sales. By the effect of the Saipem transaction now closed, by the way, this morning we cashed in the latest part of the proceeds, are in this representation anticipated at December 31, 2015. Anyway, in the press release, you can find all detailed information to reconcile the reported versus the pro form a figures.
Passing now to the numbers. Adjusted operating profit in 2015 was €4,100,000,000 down 64% versus last year. The deterioration of scenarios came at €8. €8,000,000,000 and some 2014 retroactive benefits in Gas and Power of €700,000,000 percent were partially offset by EUR 2,200,000,000 of positive performance, mainly volume growth and increased operating efficiency and flexibility. In detail, upstream accounted for the vast majority of this result with an EBIT of €4,100,000,000 This was actually strong performance, put by higher production and lower OpEx and operation cost, counteracting a very negative scenario that weighted minus €9,000,000,000 As in Power was close to breakeven, notwithstanding the worst than expected outcome of 1 commercial arbitration.
Yet this result is in line with our guidance of being close to breakeven despite the delay of Gaspar arbitration now expected by the Q2 of this year. Excluding the positive contribution in 2014 of retroactive effects implied in some gas renegotiation, 2015 results were much better than the previous year, thanks to the rollover of revised gas contracts, including one off items. R and M recorded a strong year with EBIT adjusted improvement of around BRL 450,000,000 over 2014. Refining breakeven was achieved thanks to better scenario and refineries optimization. Adjusted net income in 2015 was EUR 336,000,000 down 91% versus EUR 2014.
It was affected by 90 2 percent tax rate, mainly driven by the larger weight of some trends, mainly PSA effects in E and P that recorded an 81% tax rate. PSA are, in fact, much more resilient in economic terms than concessions, but with higher tax rate. 2nd, the growing group losses of other sectors, mainly in Italy, with no deferred tax assets associated and third, non deductible costs such as exploration that in 2015 represented a higher percentage of the depressed tax profit. On the latter effect, it's worth saying that the adoption of successful reform method would reduce the NPE tax rate by 5 percentage points. This combined with the normalization nondeductible cost I mentioned before would reduce the G and P tax rate to around 70%.
Finally, to complete my comment about taxes, let me highlight that from a cash perspective, in 2015, we paid in E and P a cash tax rate of around 34%, slightly lower than in 2014. And now I would like to highlight that due date, we completed the second deal and we are now cashing in the full proceeds. The deal, you might remember, was composed of 3 main steps. 1st, the sale of 12.5% of Saipem to the Italian Strategic Fund, of course, the 22nd January 2016, which implied a cash in of €463,000,000 With the sale, we entered in a fifty-fifty shareholder agreement with FSI, representing 25% combined shareholding. 2nd, the 2 quarter subscription of Saipem capital increase for slightly more than EUR 1,000,000,000 and third, the full repayment of Citen intercompany net debt amounting to EUR 5,400,000,000.
As a result, the net debt reduction has been EUR 4,800,000,000. Saipem will be equity accounted for by starting from January 2016. And now I would like to stress our positive financial performance. Pro form a net debt at the year end was down to EUR 11,700,000,000 implying a leverage of 22%. This significant improvement versus 2014, in spite of the challenging scenario, was achieved mainly thanks to the resilient contribution from operations sourced by lower cost PSA as well as further improvement of working capital.
It's worth mentioning that the working capital contribution is partially due to nonrecurring action amounting to EUR 2,200,000,000, EUR 1,600,000,000 more than 2014, benefiting from take or pay recovery, cashing of fiscal credits, recovery of commercial overdue and liquid destocking. 2nd, the SIPEM transaction, I just commented. And third, a EUR 2,100,000,000 of cash from disposals, including the proceeds from Galt Esnami, the latter only partially cashed in in 2015 as well as from the sale of nonstrategic upstream and R and M assets. And now I will hand it over to Claudio for his final remarks. Thank you, Massimo.
2015 was a crucial year for the implementation of our transformation plan. It is now more focused on core business and more resilient to deal with the lower oil price environment. In summary, we beat all our main targets and lowered our cash breakeven. And now we have a lean and less leverage company with a higher degree of optionality and positioned to overcome a longer downturn. In 2016, we will maintain our current production level without the contribution of one off factors recorded last year.
We will further reduce CapEx by 20% and OpEx by 11% and confirmed organic coverage of CapEx at $50 per barrel without the contribution of the working capital recovery that we had in 2015. On the basis of these results, I am pleased to announce that the 2015 final dividend proposal is confirmed to €0.40 per share. Now together with the management team, we will be happy to answer your question. Thank you.
This question comes from Mr. Clegg Amish from Bank of America. Mr. Clegg, please.
Two quick questions. First of all, I was wondering if you could tell us a little bit about the precise timing of Citan cash hitting your balance sheet? I assume it's going to be in Q1. Secondly, on Gas and Power, there were a few slight sort of bumps in the road. Could you give us a little bit of an update on where we are with that?
And are you still considering a disposal of the retail side of the business? Also, could you tell us a bit more about the SOLACE and the disposal you've alluded to in this set of results that's led to you treating it as a discontinued item? And if you're in the updating mode, Goliath would be nice to have a bit of an update on as well in terms of how things are progressing there with meeting those safety standards and producing first oil.
Thank you, Salve. So in terms of Cushing in the Q1 from Sande and Safaitan transaction, so the overall Cushing amounting to EUR 5,800,000,000. So starting from a EUR 5,400,000,000 net debt of Saipem, that is the net value, plus €600,000,000 of liquidity, total 6 percent, 200 percent worth the third party debt. So we cash in 5.8 after which EUR 600,000,000 is being utilized to complete the second transaction, I mean to subscribe the capital increase in the range of EUR 1,000,000,000, as I just said before, minus EUR 4.60 in term of price recast for the shares. And as far as the remaining part of the proceeds, Cashing, we utilized or we will utilize EUR 3,500,000,000 in term of debt repayment and the remaining EUR 1,700,000,000 is an additional liquidity.
So for retail gas, what we said in July 2014 was that Gas and Power retail business is not a typical business of an oil and gas company. And we wanted to and want to sort of unlock the value in this segment. For the near future, we will focus on enhancing retail gas performance. So we are focused on the company. We are focused on this segment to enhance and create more efficiency.
That is what we are focused on that moment. Okay. So I'll continue on Versalis. So you know that Versalis is a part of our transformations and to go toward an integrated oil and gas company. As you know, what we are doing now is to dilute our position, our interest in Drosario.
So there are ongoing negotiation. And before we started 2 years of turnaround and we got very positive results, we got positive results after 20 years. And now we are discussing, but because it's a commercial negotiation ongoing, so I don't I cannot say more than that.
Okay.
About Goliad, the consent to put in service has been obtained around mid January in addition to other important permits from the environmental point of view. So now according to the Norwegian procedures, there are 5 weeks for public hearings. Immediately after, we will prepare the platform for the startup.
Okay.
I don't know if my first answer has been clear in terms of timing. So all the numbers I just mentioned would be Cushing this day. So starting from the 22nd of January above the shares to today. So everything will be recorded in the Q1.
Excellent. Thanks a lot guys.
Next question comes from Mr. Clint Oswald from Bernstein. Mr. Clint, please.
Thank you. Just on the CapEx reduction for 2016, it's kind of split between the re phasing of projects, the expiration selectivity and contract renegotiation. Can you say which of those was the key toggle that allowed you to reduce CapEx? Or is it all of them? Or is it one of them?
And which one could be used further if prices kind of stay below your $50 scenario for this year? And then secondly, just a quick one on, obviously, your liquids production strong last year. You mentioned Iraq and Libya contributing to that. Can you give us some indication of what you expect for those two countries for 2016, please? Thank you.
Okay. Thank you. First of all, in 2015, the flexibility and CapEx reduction is clearly that concern all the three points you said. But I think that the optionality that A and E has because of the large amount of sales that we found gives us the possibility to move from complex and longer and expensive projects to projects that are simpler and that can put in that we can put in production faster with less costs. So that was a very important component, and that is something that we're going to continue and give the benefits also in the next years, but also a reduction in the supply chain that we can count for some percentage because mainly we have reduction in drilling rigs, for example, and in some materials.
So that's the 2 components. The scalable supply chain for the future will improve because we are initiating a lot of contracts and that will be a very important part of our cost reduction for the next period. For production, when we talk about when during the presentation, we talk about Iraq and Iran. We were talking about sorry, we delivered there are different things here. Now because we are talking about past cost that we recovered and increase in production, for example, in some Libyan gas yield.
So some of these production is one off and there is a variety of cost in Iran and some cost in Iraq. And the other production is also for the future, is a continued organic production growth.
Okay, perfect. Thank you.
Next question comes from Mr. Kenny Jason from Santander. Mr. Kenny, please.
Hi there. Good afternoon, and thanks for hosting the call. I'm very excited about ZOOR in Egypt, as I'm sure you are. I
don't know
if you put a CapEx number in place specifically for the project, but I'm thinking $7,000,000,000 to $8,000,000,000 for the project.
And I'm wondering if you can Can
you repeat what might you said?
$7,000,000,000 to $8,000,000,000 I'm wondering if that displaces particular spend on other assets and which regions we should be looking at for displaced spend or deferred commitments? And maybe just break out the ins and outs on where CapEx could be medium term. I mean, I'm not looking for a very specific number on CapEx on a 20 eighteen-nineteen basis, but just which projects are going to be falling by the wayside so that Zohr can be focused on? And then maybe just on the back of the Zohr focus, any commentary on the domestic gas price outlook in Egypt would be much appreciated.
Okay. So it's clear that we are missing our CapEx and the Joy is a new one, is entering and is replacing the other long term project as I said that are maybe more expensive or more longer in terms of first production. So we are replacing the project that is going to deliver production for the plan in a couple of years. And we are displacing out other projects that are longer and more expensive. I can talk about Iraq, I can talk about Venezuela, some project in Indonesia that we are not operating and some project in Norway that we're not operating.
So we found a place replacing other pushing other projects. But we find place for Voila for Zohr also with a cost reduction exercise. So we our plan is more efficient than before because we took advantage of the supply chain that improved in terms of cost efficiency. So that is the reason.
Excellent.
The second question on the bond?
Egypt gas prices.
Egypt Gas Process, domestic gas. The most of the gas will be delivered the domestic gas. And for that domestic gas, we negotiate securitization agreements, not just in terms of CapEx, but also in terms of payment. Also, we negotiate a new format for price to stabilize the value and the visibility to the return of these projects.
Next question comes from Ms. Irene Himona from SG. Ms. Himona, please.
Thank you. Good afternoon. I had two questions, please. Firstly, on coral floating LNG. Can you clarify what percentage of the capacity you have either pre sold or are about to pre sell?
Because according to BP, you're still in negotiations with them, which may or may not reach agreement. And are you prepared to sort of discuss the issue of CapEx for launching the project? My second question on refining. You mentioned that you broke refining broke even in 2015. Obviously, that was partly thanks to record high margins, which are unlikely to be sustainable.
Can you clarify where you are in terms of the restructuring? So what has been achieved so far on costs and capacity? And importantly, what remains or needs to be done in an environment where margins are likely to weaken? Thank you.
Okay. So Alberto, that's We are in this base in the
final stage of the binding session purchase agreement with BP. And that transaction is finished and we are through the document finalization. The team is sole buyer of all the production from Coral and this for a contract lasting 20 years. And this includes also any upside production that the vessel will be able to produce.
The turnaround strategy in our defense business is a 3 pillar strategy: 1st of all, the rationalization of the weaker assets second, the optimization of processes and costs and thirdly, the continuous improvement in efficiency. What we have done so far, the rationalization has been achieved on 33% of our original refining capacity through the conversion of Benoit's refinery in between 20122013. In May, we started up a new plant. Secondly, we shut down at the end of 'fifteen of the Jellal refinery, a milestone in our turnaround strategy. Thirdly, we sold the CRC stake and the reforestation was done in 2015.
And we also closed some minor lines like the deep breaking thermal trading in Caranto, 3% of our capacity. In terms of efficiency, last year only, we reduced the fixed cost of refining per barrel by 25%, from $6.5 to around $5 per barrel. Now what is still to be done? We will focus on our current assets to further enhance the profitability. The drivers of this enhancing profitability is the ramp up in full deployment of the ESP technology in San Agile.
That is a really strong competitive advantage in view of the bunkering specification change occurring in 2020. Secondly, the conversion of green refinery of Gela. And we are working to complete the mechanical condition of the plant by 2017. And finally, we continue to efficiency cost.
Next question comes from Mr. Dario Micki from Bancaagros. Mr. Micki, please.
Good afternoon. Thank you for taking my questions. The first one refers to the growth. You are the only company sanctioning new projects in this context, and this is sustaining your growth in the coming years. But as regards to 2016 and the flat guidance you have provided for, what's the level of contingencies embedded in your guidance?
But the second question is on
the leverage. Even in this case, you have a quite unique approach in the sector pointing to reduce it. And the pro form a leverage is among the lower in the sector at 22%. What's the theoretical value factoring in the deconsolidation of Versalis, if possible?
Thank you.
Thank you. So I'm going to answer to the first question and Marcin to the second one. First of all, I'd like to specify and remind that we said that we are going to produce the same amount of barrels in 2016, but it's not a flat production. Why? Because in 2015, we had one off production coming, as we said, from Iran and from Iraq and for 42,000 barrels per day.
That means that this one off will not be present next this year. So that means that we are going to increase this year about 42,000 barrels per day because we are going to keep the same organically. So we keep the same production. So that is an additional contribution. Then we have contingency.
We have contingency and we have contingency for the full year plan. So we don't want now to disclose contingency today. But clearly, we have a good range of contingency to capture all the possible situation that we can face in the next area of geopolitical and other. So we are going first. And secondly, we have contingency that we will be in a better position to disclose or describe during the established presentation in March.
Okay, Dario. I cannot reveal the exact number about Versace because you understand it's a sensible number. But as we reclassified Versalis is available for sale by the end of this year, you may understand that the advantage could be, I would say, there would be an advantage, but not so much after this reclassification.
Next question comes from Mr. Harry Tarr from Goldman Sachs. Mr. Tarr, please.
Hi, and thanks for taking my question. Just a couple of quick questions. So firstly, what visibility do you have on the OpEx reductions at this point? So you're talking about sort of 11%, I think, on a per barrel basis. And then is there potential beyond that?
Secondly, please could you give a quick update on the outlook in Libya? And then just thirdly, obviously, your balance sheet is significantly strengthened now with the Saipem cash coming in, etcetera. Have you any comments on or interest in talking about potential acquisitions at this point? Thanks.
Okay. First of all, OpEx, yes. We have a clear vision about OpEx reduction because we declare that and it's clear that we're going to continue, as we said, on the same page we had in 2015. And that is mainly due to logistics and other specific items linked to the for example, the global maintenance of our different plant and also the fuel. So we have different kind of renegotiation that we already closed and some ongoing for the operating costs in the different places.
And that will allow us to work on about $6.4 per barrel that is really a very low value. But that is something that we can consider close in term of supply chain and in term of activities, in term of downturn on some plant. For Libya, so the environment, I think that you heard that in the recent days in the past days, we had some issues not far our facilities. Our facilities have not been touched. So our colleagues are working without any problem.
From an environment point of view, I think that we can make some progress in the negotiation and in the positive, concrete and pragmatic talk between the different parties. Now they are talking, they are working to complete and approve the government. And what we noticed that is very positive that the different militias, now we can call no more militia, but the Libyan army is reacting very positively, and they are defending their territory. So what's happening in Sabraca, I think that has been a clear example that different evolution from different parts and different camps work together to create and stabilize the situation that was very, very positive. From our side, the island, the Libyan island is protecting the installations.
So we have a strong protection and also passive protection because in the last year, we had time to create a strong defense to all the installation. We have clearly very security emergency important security emergency plan to create our people and there will be strong defense our installation as in Melita, we can have all the time to put our people in a safe position. So the situation, respect to 1 year ago, also if there are lots of some trouble in the recent past, the situation is improving, is much better. And the case and discussion are progressing and for what I understood are progressing positively. Okay.
Andy, about acquisition, as Claudio indirectly explained talking about our project portfolio, we don't need any acquisition to perform the production growth we promised. So we are even in the position to select Zohr is just an example of this, select the best project to start in this environment to keep as low as possible the cost and to perform the better project. So unless for we do not envisage anything like this opportunistic occasion on this, again, acquisition are not in our radar screen today. It is like, Massimo, to add a few things about just reinforcing this going on, one thing that we need. If you look at our cost, and we worked a lot in the last couple of years on our cost there.
Now we reach an exploration cost per barrel of $70 per barrel. We have an OpEx of $6.4 per barrel and a CapEx per barrel of $14 So you can see that our assets are in our assets, we are reducing drastically the breakeven price. And I think that there's no other better opportunity that develop our asset. And that is what we are going to do.
Very clear. Thank you.
Next question comes from Ms. Kim Fusier from HSBC. Ms. Fusier, please.
Hi, yes, good afternoon. I had a couple of questions, please. The first one is just a clarification question on CapEx. Just wanted to confirm that the 20% reduction for this year is from a 2015 base number that includes only the continuing businesses, I think that excludes the CapEx on On-site and Versalis. And the second question is just around the definition of your free cash breakeven.
Could you just clarify whether you expect to cover CapEx with cash flow from operations of $50 or also to cover dividends, but with help from disposals? And what would that free cash breakeven be without the disposals? Thanks.
In terms of cash projection, I think that the better opportunity to talk about this kind of projection forward is our strategy presentation mid March, so in the coming days. What we could anticipate, talking about 2016, as Claudio highlighted, is that what we succeeded to do in 2015 that we can confirm in 2016 even without significant contribution from working capital that we highlighted during our presentation, we can match our CapEx at around $50 per barrel. So in this way, we will anticipate by $13 per barrel the target that we set when we presented our strategy last March. So on the longer term, moving back on this issue, talking about the strategy. Yes, I can confirm that the 20% reduction in CapEx is without Versalis and without Saipem.
So this is what we call a continuing operation in this presentation.
Thank you.
Next question comes from Mr. Massimo Bonizoli from Equita. Mr. Bonizoli, please.
Thank you and good afternoon gentlemen. Two quick questions. Regarding Zorfield again, could you give us some color on the OpEx level in 2019 when you target to produce 500,000 barrels per day? I imagine they are pretty low in the first development phase. So just to understand the profitability contribution in that year.
And the second question, at $50 oil price in 2016, what would be the underlying tax rate and cash taxes implicit in the guidance of free cash flow breakeven?
So the first answer, a quick question is $2.5 per barrel and now nothing for the longer one. Okay. As far as the tax rate, so I just commented that tax rate in 2015 has been high. I said 90% because of the reason I just explained. So the low level of when we are projecting $40 per barrel, by definition, this phenomenon would be emphasized in some way.
But turning on the cash perspective of this issue, I just said that on a cash basis, we recorded in 2015 a cash tax rate in the range of 34 percent. What I could say that in 2016, this cash tax rate would be in the range of 30% or even slightly lower than 30%. So this is what I just mentioned is the E and P because my comment during the presentation related to the E and P tax rate. If you would like to add some guidance on the corporate and the overall tax rate, the trend is exactly the same. What you should do is to adjust very few percentage points.
Next question comes from Mr. Biraj Borkhataria from RBC. Mr. Borkhataria, please.
Hi, thanks for taking my questions. Sorry, excuse me. Just thinking longer term, you lowered your oil price outlook to $65 a barrel. So I was wondering what kind of return on capital can you generate at that oil price in, let's say, 2017 or 2018? That would be my first question.
And then the second question, just going back to one of the previous questions, but asking it in a slightly different way. If you're covering your CapEx organically from cash flow at $50 per barrel, I know previously you've given sensitivities on your free cash flow for each dollar move in Brent. And using that, it would imply your free cash flow post dividends would be around $70 a barrel. So I'm just wondering, would there be any reason that those previous sensitivities would no longer be valid or would have changed since the last time you gave them? Thanks.
No. So sensitivities remain substantially the one that we mentioned previously mentioned. In term of, as I said before, our, I would say, coverage, including dividend in the longer term, what we would like to do maybe is to postpone this kind of treatment during our press strategy presentation in March. And 65, yes. How to return the 65?
65. In term of return, I cannot give you the overall internal return. But following what Claudio just said, so every project that now we are performing, I would say, has a breakeven that is well below the scenario that we are projecting. So the 65 longer term brand price that we are projecting the new Indonesia scenario, do not have any kind of effect in the portfolio project we are performing. And so every project will remain higher than the weighted average cost of capital we have in place.
Just for everybody, we have to keep something for the strategy, Dave. So I want to tell you that we're completely empty. We are going to really elaborate on this issue price and returns at different kind of price in our scenario during the strategy presentation. Thank you.
Understood. Thanks for the color.
Next question comes from Ms. Lydia Rainforth from Barclays. Ms. Rainforth, please.
Thank you. Thanks very much for taking the questions. Just 2 on the cost base, if I could. The first one on the G and A reduction of 30%, which has clearly been impressive since last year. It does look like 2016 implies that it's flat year on year.
Is that a reflection of just being conservative in terms of the guidance? Or do you now think that the headquarter in that corporate cost center is as efficient as it possibly can be? And then the second one was on the OpEx side. And again, I suspect some of this might get pushed to the Treasury presentation. But the last time that we were at an oil price of $50 a barrel, which is where you're looking to the cash flow breakeven at, the OpEx barrel was about $4 for the full memory.
And so is it possible to actually get back to that sort of level of cost, do you think, over the next 2 to 3 years? Or is it portfolio changed significantly from that?
No, I can answer about G and A. Yes, on the OpEx honestly, on the OpEx, because we couldn't hear you very
So yes, the question on the OpEx, if I'm looking at sort of being your company being cash flow breakeven at $50 a barrel, the last time you were at $50 a barrel, which is back in for 2,005, 2,006, the OpEx per barrel was about $4 roughly from memory. And I'm just wondering whether or not over the next 2 to 3 years, it's feasible to think about it getting back to that sort of level of OpEx or whether the portfolio really is slightly different now to where it was run?
Okay. I'll give you the answer about G and A. So you said you mentioned maybe that you have been a bit conservative in giving the guidance. We entered this G and A cost saving project 1.5 year ago with some targets, and we recognized performing this exercise that day by day, you can do more. So this €100,000,000 is exactly the result of what has been achieved in addition versus the original target.
And this is what is envisaged in existing projects that are already in place and relate to savings that has been already achieved. So now Claudio said that this level is definitely confirmed for the 4 years to come. I cannot exclude that presenting the start of the presentation may be completed. I think completed some more exercise in terms of potential cost saving addition, we will have something more to say. About the $4 per barrel in term of OpEx, Sincerely, I don't know.
So sincerely, we don't have right now a projection to come back to the $4 per barrel, really. But maybe, as Carlos said, you can elaborate a little bit more maybe mid March, Lydia.
Thank you very much.
It was the last question.
Okay. Thank you.
Ladies and gentlemen, the conference is over. Thank you for calling Annie.