Morning, ladies and gentlemen, and welcome to Annie's 2015 Interim Update and Second Quarter Results Conference Call, hosted by Claudio Descalci, Chief Executive Officer and Massimo Mundazzi, Chief Financial and Risk Management Officer. For the duration of the call, you will be in listen only mode. Thank you.
Good morning, and welcome to our first half results and strategy update presentation. Before opening the Q and A session, I would like to give you a brief update on the status of the strategic plan. Last year, we launched a deep transformation of the company by focusing on the upstream business, restructuring the mid downstream and delivering an extensive program of cost efficiency. The strength of today's results confirms that we are well ahead of the plan. In the first half of the year, E and P increased production by 9%, the highest growth rate since the early 2000.
It is thanks to the timely start up, the steady contribution from legacy assets and contract renegotiations driven by the oil price drop. In mid downstream results were positive and further improvement. R and M and chemicals returned to profits after 8 years and this is a major milestone in our turnaround plan. CapEx is in line with target and OpEx per barrel is reduced by 10%, exceeding our guidance of 7% savings. This will further enhance the efficiency of our operations and results.
The most significant achievement of our action plan has been cash generation. Despite the 50% reduction in the oil price in the first half of this year, we generated the same amount of cash flow from operations as in the first half of twenty fourteen, EUR 5,700,000,000 funding almost all our accounts. In E and P, first half production was 1,726,000 barrels per day, 9% higher compared to 2014. This is thanks to production optimization in the existing field, start ups in the Gulf of Mexico, Congo, Angola, UK and Norway and contract renegotiations. On this last point, I would like to highlight the agreement reached in Egypt.
This agreement brings immediate benefit in terms of production growth and improved gas pricing for new project, such as the fast track development of the recent Muros discovery, which will start up in the few months. In the Q2, production in Libya remains steady. In early July, we started up the Perla gas field in Venezuela. It is currently ramp up and will contribute 40,000 barrels per day in the first stage of the project. And in few weeks, we'll complete the commissioning of Goliath, which will add 65,000 barrels per day.
The 2015 start ups together with the ramp ups from 2014 will contribute 170,000 barrels per day to our production. Considering the strong performance, we upgrade our production guidance to over 7% growth versus the original target of 5%. In exploration, in the 1st 6 months, we drilled 15 wells and discovered 300,000,000 barrels of resources in Libya, Egypt and Indonesia and in the pre sold place of West Africa. These results confirm our strategy of focusing on near field activity and appraisals. The unit exploration cost of $1.7 per barrel reinforces any industry leading position in this core sector.
This first half has been successful also in reloading our exploration opportunities with more than 25,000 square kilometers of new acreage in Myanmar, UK, Norway, Ivory Coast, Egypt and we signed an important agreement for the Isatay block in Kazakhstan. These results make us confident to exceed our original target of 500,000,000 barrels of discovered resources. In the mid downstream, we recorded positive results in Gas and Power, R and M and Chemicals for the Q2 in a row as a result of the execution of the restructuring plan and the better scenario. EBIT improvement is clearly visible with an increase of €900,000,000 versus the first half of twenty fourteen. The EBIT improvement represents around 1 third of the strong cash performance amounting to an overall €3,400,000,000 The remaining 2 thirds comes from further optimization of working capital, including recovery overview, factoring and other items.
Thanks to the restructuring plan and considering current market conditions, we're further announcing 2 parts of our guidance. We will bring the breakeven chemical business forward by 1 year. Furthermore, we will anticipate the economic breakeven of our refineries originally planned in 2017 to this year. This is a consequence of the improved breakeven margin from $7.5 per barrel to $5.3 per barrel, which is halfway towards the full year term target of $3 per barrel. For Gas and Power, a positive economic result in 2015 is due to the conclusion of the ongoing arbitration and we will confirm the structural breakeven of this segment from 2016.
As stated during our last presentation, cost efficiency is one of the major objectives and we are fully committed to this. And the results here are already showing very encouraging progress beyond the initial target. We lowered our upstream OpEx by 10% to $7.3 per barrel, exceeding our original guidance on the back of initiatives in logistics, contract renegotiation, maintenance, energy efficiency and also more highly efficient production. In the first half, we reduced our overall capital expenditure by 10% compared to last year and we confirm the original guidance of cutting CapEx by 14% for the full year, excluding the impact of the recent Egyptian renegotiation. Finally, in G and A, we delivered €500,000,000 of structured cost savings, truly benefiting from the cost saving program we launched in May 2014.
These actions give us a cash improvement of €1,400,000,000 In the first half of twenty fifteen, we significantly improved the industrial performance of all the sectors. Without considering the scenario in the Saipem portfolio reassessment, we have achieved an EBIT improvement of €800,000,000 In E and P, we increased our results by almost €600,000,000 thanks to higher production and lower OpEx, development costs and exploration expenditures. In mid downstream, as a result of the restructuring, all segments improved their performance. In the first half, we generate €5,700,000,000 of operating cash flow, which is the same as in the first half of twenty fourteen, a remarkable result taking into account the $50 foreign brand and the lower performance in the engineering and construction business. This strong operating cash flow almost funding the current capital expenditures make us even more confident in confirming the target to fully cover our CapEx during 2015 2016 in a price environment of around $60 per barrel.
€600,000,000 of disposal have already been cashed in during the first half of the year and further negotiation are underway. We confirm the overall target announced in March. In June, leverage was 26%, including the 2014 dividend payment and well under our limit of 30%. To sum up, based on the first half robust operating performance, we are upgrading our 2015 targets. In E and P, we raised our production growth from 5% to 7%.
We will be EBIT positive in Gas and Power. We anticipate the breakeven in refining by 2 years at the current scenario. In Chemicals, given the current market trend, we will reach breakeven 1 year earlier. We are well on track to achieve cash neutrality in the 2015, 2016 low price environment. And finally, thanks to these positive results, I will propose to my board an interim dividend of €0.40 per share.
Thank you very much. And now we are ready with the CFO and the company management to answer your questions.
Ladies and gentlemen, the Q and A session is now open. I'd like to remind you Thank you. First question comes from Mr. Thipan Jodlingham from Nomura International. Mr.
Jodlingham, please.
Yes. Hi, good morning, gentlemen. Firstly, yes, congratulations on the progress in Refining and Chemicals. I have three questions. Firstly, just working capital.
We saw another release there. I was just wondering if you could clarify how much is left in terms of the benefits from the gas prepayments? Secondly, could you give us any indications on how the negotiations are going with GasTerra? And thirdly, Claudio, I think you've talked about deconsolidating the debt with Saipem as a priority. Clearly, the more recent update suggests that there is more stretch on Saipem's balance sheet.
So I want to know how you would think about potentially having to participate in a potential rights issue at Saipem? Thank you.
Thank you. So, Ghaz? Okay. Irrespective of our take or take position, first of all, takes to our closed agreement, we will not incur anymore in the take or pay, and we will continue to recover the advance paid for contractual volume that were not collected in the past. Regarding this, at the end of 2014, the value of the take or pay gas was on cash basis, dollars 1,300,000,000 and we expect to reduce it by the end of this year to €300,000,000 This remaining value will be also easily recovered during the remaining planned period.
That is in relation to 2 of the 3 contracts we have with them. The first arbitration award is expected by the end of this year or early next year.
Thank you. Now on Saipem, first of all, let me say that after the presentation of yesterday, I think that the Saipem management is taking the right step with a very strong action in term of cost efficiency, a refocalization and a restructuring in term of industrial activities. As you know, we have to wait in September to have a full vision of the business plan and then we'll see. I think that Saipem remain one of the first strong contractor in the sector and covering engineering, construction, offshore, onshore. And I'm really confident that it can recover very quickly.
On our position as a shareholder, you know that our target is to deconsolidate debt, and we are working on that. I don't want to make any additional comments. Thank you.
Next question comes from Mr. Oswald Clint from Sanford Bernstein. Mr. Clint, please.
Yes, thank you very much. Two questions. First one, just on the contingency that you have inbuilt into your production guidance for this year and the next couple of years, seems to be obviously in excess of what's playing out. Can you just remind us what types of factors you build in there and what could certainly if they don't play out in the second half, seems like there might be scope for volumes going up much higher. Would that be fair to say?
And also then secondly on Venezuela, Perla clearly becomes a bit more material to you over the next few years. Can you just talk about ensuring payment, the gas sales or what's the mechanism for ensuring you get paid there? Obviously, signed this week speaking about not being paid in Venezuela. So just want to know how Eni expects to get paid there for that gas. Thank you.
Thank you. So contingency in production, we took at the very beginning of the year an AI contingency. We released part of this contingency not at all because we are still possibly geopolitical issues. It's clear that if everything's continue like now with the new entry new startups and ramp ups on 2014, we have still some good quantity of production that we're going to release by the end of the year with a that and with some possible upside potential also in general cash and EBIT. For Venezuela, it's true.
Venezuela, Peru is doing very well. We are in a ramp up and a very positive ramp up in terms of production for each well. The production is doing Venezuela. We are being repaid by our Diasracion project. We have securitization, not solely guarantees normally what it works that payment through our OAC, they pay cash payment or they pay through crude.
I think that Perma gas is an essential step for Venezuela because Venezuela bought gas from Colombia. And now the really they have all the guard they need for the domestic project. So I'm confident because we put in place the right mechanism. And I am confident because until now Venezuela has been always puncturing in payment.
Very clear. Thank you.
Next question comes from Mr. Adolf Thomas from Credit Suisse. Mr. Thomas, please.
Hi. Thanks for taking my questions. I'll have 3, I'm afraid. Just the first one on your legacy assets. Just remind us how much you spend to maintain your base business in Upstream.
And presumably, you haven't really cut it year on year. And you stated earlier on that your portfolio decline rate is actually improving. And believe your target before was about 5%. Now you're seeing 4%. Perhaps if you can talk about how you're achieving that and with some details.
Just going back to Oswald's question on contingencies, just wanted to get a sense for how much it is, is it 80 kilobytes D to 100 kilobytes D and how much of that did you actually produce in the first half of the year? And sticking to production, I wonder whether you can quantify the benefits from the Egyptian contract renegotiations in terms of volume and cash uplift? And finally, if I may, just on the disposal target, over the full year plan, you aim €8,000,000,000 which obviously doesn't factor in the potential gas retail sale or Saipem. I wonder whether from Astellas perspective, the what you're seeing on the bid to ask, whether that's actually narrowing and whether that's actually a function of the seller making some concessions? Thank you.
And what progress you're making on those targets? Thanks.
Thank you. So we start from legacy asset that I think that you touched a very important point because we got a lot of improvement and also had a satisfaction about these assets. That is part of our strategy. When we talk about legacy assets and we talk about production optimization is a continued working on existing asset and also continue working not just from a production point of view, but also from an appraisal and restoration point of view. So when we have enough, we don't stop looking at data just as a producer unit, but something more.
And that is an example in Egypt where we increased drastically all our sales and the same in Angola, the same in Congo, in Nigeria, I think that we have so many example where we can increase production from the existing asset. And that is really our philosophy, is our culture. About the cost, I think that investing in the existing assets is one of the secret of our low OpEx. Now we are succeeding also in a reduction of our OpEx and we reached $7.6 per barrel that I think is the best in the industry. And that's because working on these assets means that you can use synergy with existing facilities, infrastructures, knowledge and you can be faster to have your production and also much less expensive.
You asked me the secret, I tell you part of the secret, I cannot disclose all the secrets. And in terms of contingency, I already answered. I don't want to say more than what I said. I just said that we released 50% of our contingency and we are still a huge amount of production. I want to disclose now, clearly that is something that we hope that we can release at the end of the year.
Maybe we are going to release partially at 20%, 25% in the Q3 and the rest at the end, but we want to be very prudent on that. On Egypt, I ask Antonio Vela to answer to your question.
The contribution of the renegotiation in Egypt, we have to date is going to be 24,000 barrels.
So I am going to elaborate a little bit more on the answer. I think that the Egypt agreement is a crucial one because I open up something that is new. I mean that the price is low. We are able in a very proactive and friendly way to reopen some contracts in time of gas price and that is essential to give value to all our discoveries that we did in the past. So with a different price, we can develop without any problems and that was part of the achievement.
And I think that we can say that this kind of channel, the gas can open up about 1.5, 2 Tcf or additional gas to be produced there. And that is good for us, but it's good mainly for Egypt that is really seeking for gas. And the other point is also on the oil part. So we were able to also increase some perimeter in the contract to be able to invest more and recover the investment also at a very low price scenario. Disposal, Massimo, on that he will answer on the disposal.
Hi, Massimo speaking. So as far as disposal, as said, we are confirming our overall target of $8,000,000,000 in the 4 year plan. Up to now, we got $600,000,000 mainly in Nigeria. We are going on disposing the NAM and GAAP remaining shares. So please keep this disposition, as I would say, with an high level of certainty.
And as far as the E and P assets, a certain number of discussions are going on, and are quite confident about the expectation, the final expectation. That's the reason why, as I said before, we are confirming the overall guideline.
Thank you very much.
Next question comes from Mr. John Rigby from UBS. Mr. Rigby, please.
Hi, yes. Thank you. I just wanted to ask a question about your CapEx and the activities around it.
Sorry, can you speak aloud because we are the areas.
Sorry, Claudia. It's not often I get asked to speak louder. I will just repeat. I wanted to ask a question about CapEx. I think about 1 or 2 years ago, maybe 2 years ago, you began to talk about how you were pulling in more expertise back into the business of Eni and that you wanted to take more responsibility for greater portions of the development supply chain and the development of projects themselves.
So I wonder whether you could just update on that. And then in the context of your experience in that and also what you're seeing in the contract to market and the general cost to the industry, where you see potential for the number, the 4 year CapEx number you spoke about earlier this year. I recognize we're only a few months after that, but clearly, the market is moving very quickly. So I just wonder whether you could talk about both your own self help around CapEx spending or CapEx and also the market impact on your projections of 6 months ago? Thanks.
Okay. Thank you. I'm going to answer to the first question. And then Roberto Casullo is in charge of development, engineering and technology will answer to the second one. So for improvement and how we are moving on, on the restructuring on our engineering department, I think that we are practically at the end, we have 3 big hubs of engineering.
We are running also the field, the field in engineering. And we are also participating in detail engineering. But especially, we got the first big results of this change in the structure and in the contractual structure because the first big example is the Block 15 or 6 to SDAP and very, very soon the HISTAP where we run practically as a main contractor with different packages and that create the condition not only to respect the budgets, but also to develop for sure, ultra deep for sure field developing in less than 4 years starting from the sanction of the project. The second example is Congo that we put in production and we run practically directly or the different phase in 11 months after the discovery. And we are going to continue to work like that.
So really we are putting our people on the driving seat
our people on the driving seat as a main contractor. And most
of our projects are run like that. And also we see in the first half of this year, 11 project startups. So means that on a timely manner, that is an impact of the last 3 years of refocusing and restructuring our development sector. So Roberto can answer on the cost and CapEx.
Thank you, Flavio. Well, the answer is yes. We do see a reaction in the supply chain.
As you
probably remember, we started an intense renegotiation activity of many contracts. Actually, the basket is 1400 contracts. And the main savings are, in particular, in the area of the rigs, offshore premium rigs with operating rates, which are 30%, 35% lower, also for the logistics services associated with that. This clearly has been captured in our plan. So we can say that the value we have given you on the occasion of the leadership team is certainly confirmed and is already applied into our 2015 investment.
I remember you that is for the year, the overall plan is in the range of $1,000,000,000 And this activity has been combined also with the rependering activity, which gave us outstanding results, for instance, on the occasion of the development of Ghana oil and gas project. So overall, the answer is yes, in particular, as I said, for the drilling activities.
Okay. Thank you very much.
Next question comes from Ms. Hairen Haimona from SG. Ms. Himona, please.
Yes, good morning, gentlemen. I had two questions.
First on the Downstream, if you can
give us a sense of the cost reductions resulting from your restructuring or alternatively, the benefit to EBIT, excluding the higher industry refining margin? That would be very helpful. And secondly, on Mozambique, and apologies if you referred to it already. My question was in light of the cost deflation going on, on the contractor side, are you prepared to perhaps delay FID to see where ultimately costs will settle? Thank you.
Thank you. Massimo is going to answer the first question, Roberto, the second one.
Hi, Rina, Massimo. So just to give you an idea about the cost saving and the better performance in the second half of twenty fifteen versus second half twenty fourteen refining. The improvement is in the range of EUR 200,000,000 of euros, out of which half is related to the scenario, so the better refining margin. And the remaining half is related to, from one side, the as planned in our San Lazaro refinery that now is working, giving a significant benefit to the overall EBITDA and the effect of the overall synergies and cost intervention we have made starting from May 20 14.
Roberto?
Yes. About Mozambique, our plants are going ahead very well. So there are no changes in terms of plants for FID. Actually, the in terms of cost, you know that we are running all the at the moment, all the major ETC contract tender. And in both cases, I mean, on shore and offshore, we have a very good level of competition with 3 major consortia running in both cases.
So in this area, cost through the competition, we are quite confident that we will be able to reach the level of cost that allow us to sanction the project. In terms of size of the project, I mean, clearly, we are talking firstly about Coral. After the summer, the plan is to sanction the project. And the good news just received is the approval of the environmental impact assessment. So that means that also the Mozambique authorities are really proactive toward sanctioning of this project.
And for Mambas, we already declared we are targeting 2016 for the FID of the onshore development. Maybe in terms of cost
Regarding the offtake of the LNG of the protein LNG of Corral, we are in advanced discussion with for the offtake has been finalized, and this agreement is now the basis for the ongoing negotiation for a binding sales and purchase agreement.
Thank you very much.
Next question comes from Mr. Dario Minky from Bancaagros. Mr. Minky, please.
Hi, good morning. Thank you for taking my questions. The first one is a follow-up on the disposals you announced in the business plan. I was wondering if you could confirm the EUR 3,000,000,000 target for 2015. And could you please detail the still missing EUR 2,400,000,000 to reach the announced targets?
The second one is on Iran. If you could please tell us your view on the country, the role you and I may have in the future. And according to your perception, which is the role the country is going to play in the world oil production in the coming years? Thank you.
So in terms of disposal, yes, I confirm that the plan we announced is a front end loaded plan. So the majority is affected by 2015, 2016. I wouldn't announce specific numbers as far as 2015 2016. Negotiation are ongoing and you cannot I cannot anticipate if what is under negotiation would be finally closed by the end of 20 15 or beginning 2016. So please take the overall guidance with some flexibility.
So Iran, as you already mentioned before, Iran, we believe that is a very important country in the oil and gas sector and potentially can play a strong role. I said potentially because as I said before, they need as I said, they need to invest $100,000,000,000 more to recover a very strong production. So it's a question of, as I said, the condition, contractual conditions and rapidity in setting up new projects. And we have to understand the timeframe. I think that in many cases, if you look at what is happening now that the industry is cutting 30% of the investments and we are still in very low scenario, but in a couple of years or 3 years, these cuts will impact the imbalance between demand and supply.
Also because of very low energy now, demand is growing gradually, but it's growing. So I think that in the future, we will need the Iranian production. Now we have to understand that this is potentially is it potentiality, but we have we don't know now exactly how much they can increase production.
May I go ahead with the next question, sir?
Yes, sure, sure. I've seen you.
Okay. Next question comes from Mr. Martin Roth from Morgan Stanley. Mr. Roth, please.
Yes. Good morning. So two small issues I just wanted to ask you about. With regards to Egypt, could you give any sort of idea about what type of gas price you're now getting for domestic gas? I know it's improved, but to what level?
And also perhaps a quick word on Kashygan. It's not a project that we're talking much about lately, but I assume some of the pipeline is probably ongoing by now. Still confident in that late 2016 restart?
Okay. So, Egypt, I cannot disclose the gas price. I just can't tell you that the cash price is not just one gas price because we have different projects and different kind of cost of projects. We are deep for shore, we are shallow water, we are onshore. So for each project, we discussed and agreed a gas price that make these projects economic.
So there is an improvement, an improvement that can give an acceptable internal return. And then as I told you before, can free up about 2 Tcf for gas, and that is a huge quantity that Egypt needs. For cash again, I leave the floor to Antonio Bela that can answer.
On May 15, 1 month ahead of schedule, Saifem started the offshore bike lane activity and progressing quite very well, I see now. The welding on the offshore section has also started in May, and we are also here ahead of March. As you know that the expectation is Q4 2016 pipeline ready for
Next question comes from Mr. Alastair Syme from Citi. Mr. Syme, please.
Yes. Hi. Can I ask two questions, please? One about the mid downstream cash flow you showed on Slide 5. I think you're showing about €3,000,000,000 contribution through first half.
If you look at the financial statements, there's about €400,000,000 of net income and €400,000,000 of depreciation. So how do what's the sort of the balancing item in that cash flow? And secondly, the single statements on CapEx, I'm just slightly confused about the reduction in CapEx, about what the reference point was. Was that last year, first half or 2014 or or the budget plan? Thank you.
Okay. As far as the EUR 3.4 billion, EUR 3.4 €3,000,000,000 increase in cash flow. I've said that majority of this come from the Midstream Gas and Power that is, I would say, increasing the level of return from the gas sales, either in the Midstream and retail. And then we are benefiting from, as far as the refining and marketing, the turnaround in the refinery. So we are stopping the refineries losing money, and we are increasing also, thanks to the scenario, the cash produced from the existing facilities.
On top of that, as I just remembered, the S plan increased significantly the level of cash produced by the refinery system.
So my question is more about the balancing item on operating cash for those, because if you sort of take the statements income plus depreciation, you're only getting to around about EUR 1,000,000,000 versus the €3,000,000,000 you showed on the chart?
Yes. Okay. So if we target the, say, the working capital contribution, if I well understood, definitely, the recovery of the core pay in gas that is in the 1st semester concentrated in the significant part of that. And then we are cashing in the Q2, we are cashing in the sales of gas made by the retail system. Retail concentrated the amount of gas sold end of, say, the previous year, beginning of the incoming year.
In the Q2, we are cashing in a significant part of this sales. And then we are cashing in the increase of product in the refinery. You remember that in the Q1, we said that we increased the level of stocks in refinery because of the high level of margin. So now we are cashing in what has been additionally produced in the Q1, and this cashing is in the Q2. And as far as the CapEx change semester over semester, if we take the exchange rate effect out of the comparison, so like for like.
And we exclude, I would say, what has been paid to sign the Egyptian agreement that is not a cash an overall cash item because we compensated this cash with the existing credit we have in country, the decrease is at 10%. And 14% year on year. And definitely, 14% is a confirmation of the
existing guidance for
the full year. So with guidance for the full year.
So with respect to the last year, with respect to 2014 against 2015, 10%, half and 14% full year. That is late summer.
Next question, sorry, comes from Mr. Massimo Bonizoli from Equita. Mr. Bonizoli, please.
Thank you and good morning gentlemen. Only 2 clarifications left. Actually the one is regarding Nigeria. You already made divestments there. Could you elaborate on the strategy for the remaining assets in that country following some speculation on the press regarding further divestments and then clearly the strategy there?
And the second clarification is back on Refining and Marketing. You mentioned before the improvement from restructuring and but the operating income was lower quarter on quarter despite the higher refining margins, maybe as a result of production stoppages. Could you just elaborate on the underlying profitability at 2nd quarter refining business? Thank you.
Okay. Thank you for the questions. First of all, I answer on Nigeria and Massimo is going to answer on On Nigeria, it's clear we don't elaborate or we don't comment on the press speculations. What I can say that we are focusing on the offshore. So we are developing the offshore Nigeria offshore where we find a lot of we have resources.
On the onshore, what's happened in the last 3, 4 years, we are selling, we are disposing assets with Shell. And that is what is happening. So we are disposing assets we are not operating. That's what I can say at the moment.
Okay. As far as refinery, yes, you are right. The results in the second quarter has been lower than the first one. And the reason here is some maintenance we had in Milazzo, significant maintenance in Milazzo and some maintenance in Sanadaro. So if you take this maintenance result out of the result and take into consideration that you remember, we put in place some edge on the refining margin that will be over in August with the attempt to anticipate a breakeven of our refinery.
So if you take all this action out, the breakeven is the real result of our refinery in the second quarter.
Okay. Thank you.
Next question comes from Mr. Neil Morton from Investec. Mr. Morton, Neil, please.
Thank you. Good morning. Two questions, please. Firstly, just going back to Alastair Syme's question, I still get confused on the CapEx. Perhaps just give us what your what the dollar CapEx number is going to be for 2015, please?
And I assume most of that CapEx is in dollars. Maybe just secondly, just from a strategic perspective, a little bit uncertain as to what ENI's view is with regards to North American shale. Do you want to increase your exposure in the medium term or not? Thank you.
Projecting CapEx. So when we refer to the 14% reduction, the exchange rate implied in our assumption is 1.12. So that is a significant lower than the average we got in 2014. That's the reason why I mentioned the exchange rate you had to take out in order to make a comparison like for like.
So for the question about shale oil and North America, first of all, I have to say that they like a lot North America and also Shale. But at the moment, we have other priorities. So our priority is to continue our terms of cash neutrality, in terms of payout, where we have a very strong target and we want also to give value to all the aspiration we made. So we have some end. And as we said, we want to continue to keep at a good and positive level R and M Chemicals and Gas and Power.
That they are our priorities in the next month and we want to fulfill this. Then we think about the future, but I think that our future at the moment are these priorities.
That's very clear. Thank you.
Next question comes from Mr. Biraj Borkhataria from RBC. Mr. Borkhataria, please.
Hi, thanks for taking my question. It was just on exploration. Obviously, a very successful H1. But I was wondering if you would expand a little bit on your exploration activities for the second half of the year on any color on wells to watch? Thanks.
Luca Bertelli will answer to this question.
The second part of the year, we will be mainly active in Congo, Gabon, Angola and Egypt. So these are the main activities where we expect results coming in, in the second half.
Thanks.
Next question comes from Mr. Rob West from Redburn. Mr. West, please.
Hi, thanks for taking my questions. This morning's release says retail sales in Italy are expected to be a slight decline compared to 2014. Last quarter, I think the wording was that they would remain relatively stable. So I was wondering, can you disaggregate the change for us there? Is that an indication that there's really not any demand elasticity coming through for driving the demand of the products in Italy?
Or is another part of it, any specific effect connected with comments about market share last quarter? That's my first question. And then just secondly, maybe a quick rundown would be quite useful. Just 3Q, the big fields in Libya, so Wafaa, Melita, El Buri. Just how is the integrity of those holding up?
And can you just give us some reassurance there? That would be great. Thanks.
Okay. Thank you for your question. Regarding the sales in the oil sector, retail sector, you're right, we experienced some reduction in sales. And this is due to the fact that during this period, there has been an increase in refinery lands in the country. And therefore, there is a higher competition for the product.
So in the end, what we had is lower sales in the retail but an increase in market protecting our margins in the Refinery.
As a follow-up on that, am I right in thinking that your wholesale refining margins are generally higher dollar per barrel than your retail margins. It seems to vary company by company. I don't know if there's any breakdown rule of thumb you can give around typical marketing margin. It's not something we can break out from your disclosure. Sorry for the follow-up, but that would be useful.
Well, I'm sorry we didn't break up the results on the marketing side. Nonetheless, let me say that after years of the lag of a reduction in consumptions in Italy, in 2015, we actually seeing steady and flat consumption. So we can see that the efficiency in demand is actually reflecting the lower quotations in the market.
Okay. Thanks.
Thank you.
Okay. Now easier question, Libya. So far so good we can say. It's not that we are steady in terms of production. We're not just watching our production.
We in this period with NSE, with MOG, so the 2 Libya companies are we are protecting all our activities, what about the future. I think that recently in the last 2 weeks at international levels has been put in place a big effort and Libya after 1 month of negotiations reach the first agreement so has been signed. Our hope that as other party can join these agreement and that I see as a very positive point, willingness to find a solution to this conflict. And our positions, just to give you a perspective about how we can keep our production on is that, first of all, we are in the western part of the countries and we are in the north and in the south. And but most of our production is coming from offshore.
And substantial part of our production is feeding the lithium power plant. So it's really feeding all the country and give power and electricity to all the countries. Is one of the main reason why all the main non shore installations are on. So in this area, we experienced until now that it would be peaceful, we can say environment. And I think that I have to say that the state company NSE is very proactive in maintaining the installation, controlling their production and really doing very well.
So I really hope that we can continue as we did in the last one and a half year and we can continue with the steady production. And that will help us to release finally at the end of the year the remaining contingencies. Thank you.
The last question comes from Mr. Hamish Clegg from Bank of America. Mr. Clegg, please.
Hi there. Thanks for taking my questions. I think I had a small issue registering it. I think it was a Nordic thing. But the three questions I had for you, first of all, on your volume guidance, which is great to have a beaten raise.
It implies that the second half, however, will be potentially a little bit lower than what we've seen so far in the first half or at least the average in Q2. You've mentioned contingency a lot. Is there anything about contingency there that is planned downtime? Because it strikes me that your numbers your guidance is maybe
a little bit
low. And could you quantify the sort of PSC impact in raising your guidance and how that's made a difference? The second question, I appreciate the sensitivity around Citam. You did mention that it was in your plan to deconsolidate. Could you confirm if or at least give us an idea if you expect there to be a debt refinancing at Saipem as part of their restructuring plan?
And then just finally on Coral LNG, I know Irene asked about it already, but the bids must be sitting on your desk. Does this accelerate your ability to negotiate with the buyers? And can we expect to
hear something in the Q3 on that?
Michel, so the first point is, I think that you remarked that in our new guidance, we say above or over 7%. So we increased our guidance and we increased, but we don't say 7% is above 7%. We have in the second half, we have some maintenance. But as I said, all along the Q and A section, we are continuously. So we also if we increase the guidance, we already we keep we are keeping a conservative or prudent view on that.
So that is the reason about your calculation of a lower production in the second half of in the second period. For Saipem, sorry. For Saipem, as I said before, I think that we are following Saipem. We have a clear objective that we declared to the market. We don't talk about financing or other stuff is not at the moment now.
It's something that is also related to the listed company and is also related to them to talk about that because we are talking about the consolidated debt, but it's a day debt. So it's something that is related to Saipem. So I don't want to make any comment on On the Cora, from a commercial point of view, I ask Humberto Verghe to elaborate a little bit more on that.
As I said before, we are now in an advanced stage of negotiation for the binding sales and purchase agreement. Our target is to complete this activity by the Q3. But of course, the final outcome will depend on the ability to quickly progress on this negotiation with the counterpart.
Very good. Thank you so much.
Okay. Thank you.
Ladies and gentlemen, the conference is over. Thank you for calling Annie.