Conference Call. Today's conference will be conducted by Mr. Guzzo Guen Imez and Angel Bautista. A brief introduction will be given by Mr. Angel Bautista, Head of Investor Relations.
I would now like to hand the call over to Mr. Bautista. Sir, you may begin.
Good day, ladies and gentlemen. This is Angel Bautista, Director of Investor Relations. On behalf of our company, I would like to thank you for taking the time to attend this conference on results, 4th quarter and full year results. This presentation will be conducted by Mr. Josu Jon Imas, our Chief Executive Officer.
Other members of the Executive Committee will be joining us as well. Before we start, I invite you to read our disclaimer note. We may make forward looking statements, which are identified by the use of words such as will, expect and similar phrases. Present results may differ materially depending on a number of factors as indicated on the slide. I'll now hand the conference over to Mr.
Josu Jon Imas.
Thank you, Angel. Thank you, every people for attending this conference where we will address 3 main topics. 1st, the main events of 2014 secondly, the quarterly and full year results and finally, 3rd, an update on the acquisition of Talisman Energy together with the outlook for 2015. Let's start with the main events of 2014. We end 2013 and began 2014 with the closing, as you could remember, of the disposal of our LNG assets to Shell as planned.
During the 1st week of 2014, we were able to close the settlement with the Argentinian government in relation to the controlling stake of the Repsol Group in YPF and YPF Gas. That agreement, which was ratified by Repsol's Annual General Meeting in March with a 99.7 percent acceptance, included the recognition by the Republic of Argentina of up debt to Repsol amounting to $5,000,000,000 In May, the Republic of Argentina delivered a portfolio of Argentinian sovereign bonds, which Repsol decided to sell, obtaining almost $5,000,000,000 very close to the maximum amount of Repsol could cash in according that agreement. Additionally, we sold our remaining 12.3 percent stake in YPF for $1,300,000,000 In total, we closed the Argentinian solution to the exploration, cashing in US6.3 billion dollars After that monetization of our Argentinean assets, the Board of Directors, of XOL of course, agreed to pay an extraordinary dividend of €1 per share, substantially improving our shareholders' remuneration for this year as committed to compensate the support, let me say the full support of our shareholders during the expiration period. We ended the year with the announcement to acquire Talisman Energy in agreement with its Board of Directors, taking advantage of our sound financial position and in order to consolidate our strategic objective of growing in our upstream division while improving the risk profile of our portfolio, we decided to enter into a transformational transaction.
And let me say that the acquisition of Talisman fits all the strategic requirements we were looking for. First OECD or OECD like countries based portfolio. Secondly, growth platforms to prepare Repsol for future value creation and sustainability incorporating new capabilities to improve the competitiveness of the company and finally, value creation for our shareholders. Now let's move to the 4th quarter and full year 2014 results. Q4 2014 CCS adjusted net income was €370,000,000 and CCS adjusted operating income was €626,000,000 These results were 2 0 1 percent and 197 percent higher, respectively compared with the same period of last year, thanks mainly to the good results obtained in the downstream business.
20 euros and CCS adjusted operating income was €2,400,000,000 at 27% and 12% higher respectively compared with the same period of last year. Starting with the upstream business, yes, you could say now, adjusted net income for the Q4 was €4,000,000 98% lower than in the Q4 of 2013. Let me explain the main differences that are due to, first of all, a higher production. We increased production year on year in Sapinhoa in Brazil, in our internally project in Peru, in Venezuela, the United States, Bolivia, Trinidad and Tobago and Russia. And this increase resulted in a positive impact on the operating income of €124,000,000 Production reached 371,000 barrels of oil equivalent per day during the Q4, a 16% increase year on year.
When we look at the full year, we reached an average 355,000 barrels of oil equivalent per day, a 2.% growth compared with 2013 despite lower output coming from Libya. If we compare, let me compare both years without Libya production growth would have reached 8%. 2nd factor lower crude and gas realization prices that had a negative impact at the operating level of €232,000,000 I have to add higher depreciation charges, some higher depreciation charges due to higher production that had a negative increase in operating income of €77,000,000 mainly due to lower amortization of wells and lower G and A and G and G. We also have a higher taxes with a negative impact of €19,000,000 basically in Venezuela and Brazil due to the depreciation of the local currencies against the dollar. And finally, other items such as the minority interest and equity affiliates and other costs explain the remaining difference.
Our full year net adjusted result in upstream was €589,000,000 a 40% decline due to lower production in Libya for security reasons as you know and lower prices. Discussing about our Upstream division performance, I'd like to end with our reserve replacement ratio that was 118% for 2014. We finished the year, the year 2014 I mean, with a total of 1 point 54,000,000,000 barrels of all equivalent of net proof of reserves. And And rolling average over the last 5 years has been 198 percent. Turning to our Downstream division, adjusted net income in the quarter was €370,000,000 which compares with the €21,000,000 of the Q4 of 2013.
Full year net adjusted income stood at more than €1,000,000,000 a 111% increase compared to 2013. Drilling down, even being in downstream business, let me hit drilling down into the quarterly results. In refining, we saw a year on year increase in margin from $4.1 to $5.5 per barrel, due mainly to lower energy costs, wider spreads between the products, mainly gasoline and middle distillates and Brent. Higher margins had a positive impact at the operating level of €251,000,000 The utilization rate of our distillation capacity has been 80.1% during the in line with the full year utilization rate. And we run the conversion capacity at full speed, reaching 105% of utilization rate.
In the petrochemicals business, wider margins and higher volumes allowed us to improve the operating income by €126,000,000 And this improvement is due to the competitiveness programs implemented during the year together with a better market environment. In the commercial businesses, it was the LPG division the main driver of the €45,000,000 increase in the operating income. And notably, it's worth mentioning that in the Q4 of 2014 as well as in the full year, sales in our marketing division in the Iberian Peninsula and the market in general continue the growth trends seen in previous quarters. I presume that due to the economic growth we are experiencing in the countries where we operate our commercial businesses. Moving to Gas and Power, operating income in the quarter was €102,000,000 higher year on year in North America.
Results in trading and other activities explain the remaining difference. In Gas Natural Fenosa, the €67,000,000 adjusted net income in the Q4 of 2014 was 32% lower year on year. And these lower results are mainly explained by the provision for impairment that Gas Natural Fenosale did of the Egyptian LNG plant of Damietta. Finally, we have seen a decrease in the financial charges year on year, thanks to a higher result of the dollar euro exchange rate positions, lower debt and the reduction of its average cost. To sum up, this quarter we have delivered a fair set of results with improved performance of our downstream business offsetting the lower results of the upstream division due to the current environment of lower crude oil prices.
We've been able to generate positive free cash flow before divestments during the year and even now low crude oil scenario, the integrated model we have designed allow us to remain resilient. The different investment cycles and cash generation of the upstream and downstream businesses contribute to a greater stability of our results. And let me say that additionally, the increased U. S. Dollar strength and the significant portion of our gas production not linked to oil prices provide further steadiness.
On top of that, we have the likelihood of the dividend flow and results of our affiliate Gas Natural Finosa, a stake that provides further optionality to protect the company in any possible scenario. Let me now give you an update on the acquisition of Talisman Energy and the outlook for 20 15. As you may already know, the shareholders of Talisman approved last week, I think on February 18th, the sale of the company to Repsol in the special shareholder meeting that took place in Calgary. We're working together with Talisman Management always within the scope of course of the arrangement agreement to achieve a smooth integration. We are already identifying value addition initiatives arising from the combination of both companies.
This is a transformative opportunity and we will challenge all that we do and draw on the best of both companies, fully integrating Talisman to emerge with 1 single culture. We are now in the process of obtaining all necessary approvals, a process that is evolving as expected. Closing should take place before the end of June 2015. And let me now speak about what we should expect for 2015. Pending closing, we can't speak at present of the figures of the future merged company, but we'll have the opportunity to do it in coming weeks.
On an external basis, within Repsol, we are revisiting or reviewing our investment program, including our exploration budget in light of the current environment, together with implementation of efficiency and cost cutting measures. In the upstream business, we'll invest $2,700,000,000 which compare to the $3,800,000,000 invested last year. We are reducing our exploration CapEx including in this case G and G and G and A to $1,200,000,000 a 35% decrease with respect to 2014. Our investment in the upstream division is going to be focused on the development of our projects, mainly in Brazil, the United States, Algeria and the Caribbean and Andean areas. Our downstream business investment will be applied basically to maintenance and to our programs to reduce CO2 emissions, increasing profit through energy consumption reduction at our industrial plants and giving more steps of the new specifications project in our refinery in Peru.
During the year, we will review all of our supply chain and the relationship with our suppliers and service providers in order to reduce costs. We have already started and we are seeing price reductions arising from them. Finally, the integration with Talisman Energy will allow us to optimize even further our CapEx program from 2016 and beyond. And I like to confirm that after the Talisman acquisition, we envisage that we will maintain our competitive shareholder remuneration at current levels with the script option. 2016, 2019, we can advance some strategic lines of the current and future Repsol that of course we are going to develop them in the future strategic plan.
We have obtained through the acquisition of Talisman the right balance between our upstream and downstream divisions for the short and medium term. Therefore, our upstream business won't have the mandate to grow. The mandate for our upstream business is to focus on efficiency and value creation through portfolio management at the right moment. Downstream will remain a strong efficient free cash flow generator with the right size. Niche international developments could arise, leveraging, of course, our wider geographical presence, mainly the lubricants, chemical or trading businesses.
From the combined portfolio Repsol and Talisman, we will be able to optimize CapEx and costs without the need to grow. Exploration intensity can be reduced when needed. Let me add that we will remain fully committed to our financial discipline, maintaining a strong balance sheet and competitive shareholder remuneration. Because with a much broader portfolio and no need to grow in the mid term, I like also to stress the fact that portfolio management will become a strong driver of value creation, as it has been in the past once the macro scenario favors this activity. Sustainability, safety, covenants, good co burners and environmental management at the highest standards will remain at the core of our operations.
So to conclude, 2014 will remain in our memory as a transformational year for Repsol, a year in which Repsol was able to exit Argentina, deploying the money obtained from the compensation and increasing the scale and quality of our upstream division. With this acquisition, we complete the achievement and surpass the targets that we established in the strategic plan 20 twelve-twenty 16, released some weeks after the appropriation of YPF. We will now focus on the integration of Talisman and thereafter on establishing the new strategy of Repsol outlined in this speech. Thank you very much for your attention. We will now be pleased to answer any questions you may wish to ask.
Thank you. Thank you.
Thank you very much. This is Angel Bautista again. We'll move now into the Q and A session. As always, we've been able to chat in the webcast, but just only use it if we have any connection problems during the call. In case that happens, we believe it won't happen.
We will address those queries at the end. And well, now let's move into the Q and A session. First, we have Felipe Rosa from Banco Spiritu Santo.
Three questions. The first one relates to your output for 2015 in the upstream. If you could provide us some guidance, The Q4 exit rate is much higher than the average for the year. So if you could provide us some color on guidance for 2015, taking into account specifically probably some comments on Brazil and Libya, which that could provide some important swing factors. My second question relates to your guidance in terms of CapEx.
So you guided for upstream. I don't know if you apart from exploration, where do are you cutting any projects from your pipeline? Are you delaying any project so that you managed to reduce your CapEx so significantly? And if you could provide us a guidance for the overall company for 2015 in terms of CapEx? And finally, on exploration, you are reducing your budget, but 2014 was a record year in terms of investment.
Could you just let us know what are the main highlights in terms of wells for in terms of exploration for 2015? What are the wells that we should look at? Thank you very much.
Let me say regarding our guidance for 2015, in terms of production in our upstream business, our guidance is to increase in a 6%, 7% the current production that we have had this year in 2014. That is a fit in a current way with our strategic plan. And let me say that we are forecasting this production and this increase of production excluding both years, the possible effect of Libya. Anyway, as you could as you know, the production in Libya in net terms last year was only 13,000 barrels per day as average. So even in the worst situation, we are going to increase our production in 2015.
Regarding our upstream CapEx, our E and P investment decrease is at 27% in dollars with respect to 20 14 and up 57%, a bit more than the half cut or decrease in investment. Correspondor comes from lower investment in exploration. And I think that there are some reasons behind this reduction. One of them is the intensive exploration campaign of 2014. So we are comparing the current figure or the guidelines for 2015 with $1,800,000,000 invest in exploration in 2014.
That is a very important figure. And the other part of the reduction is also the rationalization of our exploration activity because first of all the new strategic scenario, I mean after the acquisition of Talisman, we are not in some way obliged to grow every year. We could put more focus on value creation, on free cash flow generation and not in growth. And of course, we are also in general terms adapting our investment in E and P to the current low price scenario. Up 40%, 45% of the full reduction in CapEx corresponds to lower development investment through cost reduction.
Of course, we are benefiting from the current market condition. And in some ways, the reduction of running investment, non critical activities in ongoing projects And in any case, we are slowing down or delaying the critical and strategic development projects in our upstream activity. I think that you also asked me about Brazil. In Brazil, we are going to achieve the plateau of the production in Sapinga North, the north part of the project Sapingo at the end of the year in Q4. After achieving this plateau, I think that in gross terms we'll have a production of 270,000 barrels per day in Sarpinhua.
So you have to take into account that we have the 60% of the 25%. That means in net terms plus our production in Albacola, our production at the end of the year at around 4,300,000, 45,000 barrels per day net terms for Repsol in Brazil. Regarding Libya, regarding Libya, I mean, first of all, as you know, for security reasons, we shut down our production in the 1st week of November. In the short term, on the ground, I mean, we have a strong security concern and we have not any many hopes regarding the short term there. Perhaps in operational terms, let me say that in another scenario where we could have a fair and good security environment on the ground, we'll be able to achieve almost the full production in 27 or 96 hours.
That means that in technical terms, we will be able to overcome this situation quite quickly. And perhaps let me add on the strategic analysis about Libya regarding the medium and long term. Is evident that Libya is a problem for Brazil. But let me say that Libya is also a problem of course for Libyan people and also for Europe because in the current international scenario, the possibility to have a failed state in the borders of the European Union, I mean, is a main concern for international community. So we are following and we think that this effort of international community trying to stabilize the country could have a good result in the medium to long term.
But I mean that is a strategic analysis regarding the future. And in the short term, the only thing I could say is that we have strong security problems. Regarding the guidance CapEx for the whole company, the $4,800,000,000 was the full CapEx in 2014 and we are going to reduce to $3,800,000,000 in 2015.
Okay. Thank you very much.
Excuse me, I forgot it because I have here notes about your questions and I forgot to answer the last one. In the same spirit of the current strategic and oil price situation, we are going to be prudent regarding our exploration campaign. That means that we have more appraisal wells than frontier wells. The appraisal wells that are going to help us to define coming projects are the appraisal in Campos 33 in Brazil, the appraisal well that we are to develop in the Gulf of Mexico to appraise our recent discovery of Leon. And finally, 3 wells in Alaska, 2 in the area of Cubicorn, 1 in quarter more or less of 2016 a development project for Alaska.
In total terms, we are going to dry 21 wells this year, 13 are appraisal and 8 are exploration pure wells. And let me say that regarding we are trying to reduce our exploration in frontier wells in frontier areas. And regarding this kind of areas, we are going to explore 2 wells in Angola in the Block 22 area and the third one in Norway.
Okay. Okay. Okay. Okay. Thank you very much.
Thank you very much.
Thank you, Filippo, for your questions. Now let's move to Haitham Rashid from Morgan Stanley. Hi, Haitham. How are you today? Please go ahead with your question.
Thank you, Angel. Good afternoon, gentlemen. A couple of questions from my side, please. Firstly, just on the North American Gas business and the good results you've had there. I just wondered if you could give us a sense of how repeatable that will be in 2015 and it seems to be an area where it's delivered over and above sort of expectations reasonably consistently.
Is there something you can tell us about how much of that sort of performance is something that we can see continue into 20 15 and help you through sort of further the sort of weaker oil price environment? Secondly, I have a question on the CapEx guidance that you gave for 2015. But specifically, what you're basing price? So is the 27%, 20% reduction in CapEx a reflection of the does that sort of assume your base price deck that I think you talked about before of $85 $20.15 $93 $20.16 or are you looking at a different oil price scenario with that CapEx plan in mind? And then my final question is really around your new strategy.
I appreciate that you probably will come back to us with more detail on that. But perhaps if you could just elaborate a little bit about this, the idea of more sort of portfolio management and focusing on value creation. Could you tell us a little bit about what that sort of can entail? Is that sort of looking at all assets within your portfolio like Gasnat? Is it about monetizing more of your upstream discoveries that the exploration successes you've had earlier on?
Just a little bit of color around that would be very helpful. Thank you.
Yes. First of all, starting for our Gas and Power business in North America. I mean, as I said in my speech, we are the factor of the mark to market positions we had in the 4th quarter. Of course, we are going to do our best to repeat these results in the future, but I have to say you that we depend in a close way from weather, for instance, because you know that we took advantage of the high prices in New England and in the Northeastern American coast. And in these scenarios, our canopor plant and our commercialization business in North America is more profitable.
So I can deliver of course anything regarding the Q1 of the year, but I could say that that is going to depend in a strong way from the weather in North America and of course the mark to market positions we have. Regarding the CapEx reduction, I mean, first of all, we have a long term price scenario, a price deck. And in our opinion, I mean, the right count drop in unconventional production, the natural decline of wells and the long term slowdown across the sector will translate into a tightening of the supply demand balance that will bring prices up. That is our view regarding our prices scenario on our deck. But of course, we are not here to forecast the oil price scenario, but to manage the current scenario.
So my duty is to manage this company in a scenario where the Brent price is $60 per barrel. And regarding this scenario of $60 per barrel, we have to be able even in this current scenario to have as Repsol, I'm talking of course about the Repsol stand alone company, I can't deliver any figure regarding Talisman as you know before. The closing is to have a free cash flow neutral scenario at the current oil prices. So to achieve this objective, I mean, we are being very present regarding our CapEx in our upstream business. And of course, we are trying to promote efficiency in every business of Repsol.
As you know, we have a long track record of managing businesses in tough scenarios and talking in this case about refining, petrochemicals and some others in the current European scenario. And I think that we could be able to do that. Regarding your last question, portfolio management, first of all, we are not in a hurry to divest anything. First of all, we have the cash we need now to pay Talisman transaction. And it's true, I mean, we announced to the market that 12 months after the closing we are going to be able to divest €1,000,000,000 in the market.
That is I mean 3% to 2% of the total assets of Repsol is not too much. And of course, we are going to take account the oil scenario price in this policy. And in that case, I mean, we will try to divest in assets not directly linked to the oil price. And I mean, regarding gas nat, you know that Gasnatt is always an alternative and but today's environment reinforces the integrated model with a strong cash generation coming from downstream and Gas Natural Fenosa. And gas natural FENOSA brings a cash dividend with a much higher yield than the marginal cost of debt after tax.
So we are not in a hurry to do anything regarding divestment. We'll do it, but in the very moment.
Okay. Thank you very much. Very clear.
Thank you. Thank you very much. Hi, Sam. Now let's move to Bruno Silva from BPI. Let's go ahead with your questions.
Thank you very much for your questions and for taking my questions. The first one, a quick wrap up on the Venezuela context that has been deteriorating. And I remember asking you in the last earnings conference call, what was your position? I just wanted to have, if possible, an update from your side. Several other companies probably more affected by the local currency have been doing impairments.
I didn't quite see any reference to Venezuela amongst the impairments and provisions that you have recorded that you have booked in this last quarter. I just wondered if you could make an update and what criteria are you using in order to do impairments or not, particularly regarding Venezuela? And the second question related with recent news with potential investments in Canaport, if you could comment on that? And related with the results from Canaport, can you please quantify what is the contribution from the mark to market of positions in these results? And finally, you commented that you are still keeping the €1,000,000,000 divestment target.
I would just compliment by asking if after this couple of months since the announcement of Talisman deal, if you have evolved in terms And if you could provide us what would be for now, And if you could provide us what would be for now the annual schedule of savings and integration costs namely for 2015? Thank you very much.
[SPEAKER CARLOS ALBERTO PEREZ DE SOLAY:] Thank you very much, Bruno. Let's start by Venezuela. Let me say that we are operating in Venezuela in a normal way and we are developing our projects in Venezuela in a normal way. And let me also say that I know that there are some companies or sectors that could have less or more difficulties in Venezuela. But you also have to take into account that the oil and gas sector is very particular in Venezuela, because it's a key factor for the economic sustainability of the country.
And so the environment where we operate is different from the environment in business terms, I mean, where some other sectors or or companies operate. Regarding the influence of risk of devaluation in accounts in Venezuela, I mean, the last exchange rate for the sector, as you know, contemplates the official exchange of 6.3 bolibars per U. S. Dollar. So there is not any impact on the oil and gas sector companies.
Of course, we did a provision of 74 €1,000,000 in the last quarter. And why mainly, I mean, in terms of prudency regarding the possible evolution of the year. Let me say, I don't know what is going to happen in the future. But even that is not going perhaps it's not going to happen, but even in a future scenario of the devaluation of the official exchange rate, I mean taking into account that our operations in that country are strongly dollarized. Taking into account that we could have gross effects, I mean, we could be we could have a short position in Bolivar's loan in dollars.
So in financial terms, we could have positive effects. And in tax terms, we could have negative effects. I mean, our people, our team with this provision is comfortable for this year even taking into account a possible scenario of a devaluation of the official exchange rate. Next point, the mark to market of Canapord in the 3rd in the Q4 has been more or less in operational terms EUR 60,000,000 sorry, I mistook, dollars 60,000,000 So that is the mark to market position. But of course, this mark to market position, I mean, in cash term is going to be recovering in January, in February at the end of the contract.
In the other side your next question was about sorry? Canaport. Potential investment in Canaport, sorry. I mean, as you know, Canaport goes outside the perimeter in the sale of our LNG business to Shell. And of course, our goal is now to maximize the value of the plant, analyzing, studying and trying to implement different alternatives.
I mean, it's true that in the market, you know that there is a growing interest in exporting LNG from United States, from the Eastern and Pacific Coast of Canada. And we are trying to take the steps in this direction, I mean, in order to know this option to be open and to be available for Repsol. So the idea is to design an attractive product for Repsol and for 3rd parties in order to I mean to be able to attract investment. But let me say let me underline that Repsol doesn't contemplate under any scenario to make a significant investment in Canapur. So in terms of CapEx for Repsol, it's going to be near 0.
And now we are looking for permits. We are analyzing engineering of the project and we are going to try, I mean, to be able if we could have the the possibility to analyze a different alternative. And I think that it's okay. Yes, okay. Sorry, I forgot it.
Yes, I mean regarding Talisman, let me say that I have to be very, very prudent. As I said before in my speech and in my answer. I mean, at the current day Talisman is another company and we could have the opportunity after the closing to manage the company to know in the correct way where the more strong points weaknesses are and of course to analyze and to deliver the synergies we forecast when we design the takeover operation over Talisman.
Okay. Thank you very much, Bruno. Now let's move to Lydia Rainforth from Barclays. Hi, Lydia. It's always nice to speak with you.
Please go ahead with your questions.
Thanks, Angel, and good afternoon. I stick to 3 questions if I could. Can you just tell us where you are regarding the thinking on the hybrid bond and whether you need to get that done before the deal closes whether that is done in the second half of the year? And then secondly and partly linked to that, clearly the oil price at the moment is below what I think you considered the acid test when you did the Talisman deal. Is there any implication on that in terms of what you think you might have to do with in terms of the credit rating agencies?
And just outline any discussions you might have had with them on that? And then just a final question, actually 2 if I could. Final third question just on the cost optimization side. How much are you looking for that being and this is just for Repsol itself. How much are you looking for that to be self help and efficiency improvements versus what you're looking for from the suppliers side?
And just a very quick clarification question. The conversion capacity utilization of 105%, is that the maximum that you think you can get to? Or can that be pushed any higher at all? Thank you.
Thank you, Lydia. First of all, let me say that we are not in a hurry to issue the high risk bond. I mean, we delivered, as you know, in the roadshow and after the announcement of the acquisition of Talisman that we are going to issue a hybrid bond of a maximum of €5,000,000,000 but is in some way a financial cushion. We are not going to do it. I mean, we are not in a hurry to do it now.
We could pay the full Talisman transaction with the cash we have in our pockets. That means that we are going to do that over the year, perhaps in 2, in 3 tranches. And we are of course to take advantage of any window opportunity to issue this hybrid. But we are not in a hurry to do it. And I mean, we'll deliver the information about this issue in coming next 12 months.
Regarding the rating, I mean, we have enough financial flexibility and to give a strong answer regarding the maintenance of our keep going our rating grade. So we checked with some rating agencies 2 months ago the scenario and we haven't got any news neither linked to external factors nor to price scenario that have changed in over the last 2 months. And let me say, let me underline that we'll do whatever it takes to maintain the current investment grade. And let me say, we have many tools to react. We have, of course, the cash we have in our pockets.
We have the, of course, the hybrid bonds issuing process. We have the portfolio management. We have the reduction of CapEx of further divestments not linked to oil prices assets. So but our financial caution is really that we are going to maintain our rating rate. 2nd question, cost optimization.
I mean, more or less when I was talking about our reduction of $1,100,000,000 in CapEx terms in our upstream business, I said that 55% more or less I remember the figure comes from the exploration activity and 45% from our development programs. So let me say that more or less from this last figure that could be $450,000,000 a 50% could come from I mean in some way slowing down some running investments or things like that and 50% comes from efficiency. That could be $200,000,000 $250,000,000 in our upstream activity and that means more or less 6%, 7% of the full CapEx. And I'm talking of course about CapEx in upstream regarding this efficiency or cost optimization. That is more or less fits in a current way when what is happening and what some other companies of the sector are delivering now.
And of course, you know that we are and we continue improving the efficiency of our downstream businesses, mainly through the reduction, thanks to our CO2 program, the reduction of our energy cost. And you know that in our refineries and in some way perhaps a bit less of course in this last case of the petrochemicals, but in our refineries 65% of the total cost is energy. So and last year we have been able to reduce in 450,000 tons our emissions of CO2 of the company mainly in our refining and petrochemical businesses also apart in the upstream business. And thanks to these CO2 reductions, we have reduced in a huge way our energy cost in refining. And we are going to go on through this program over 2015.
I mean, I know that regarding I note here 105 percent the conversion utilization rate in refining. I think that that could be a quite astonishing figure. But you have to take into account, first of all, that when we use the term utilization, we are comparing with the possibility we have to operate the plant outside the maintenance programs. And second one, you also have to take into account that in some processes mainly cokers and we have 4 cokers in batch. That means that if we are able to reduce the time of the full cycle of the coker that means that we are able to increase the comparison utilization rate of our system.
Theoretically, I mean, we could say that and 8%, 110% could be the maximum, but be sure that we are going to do our best to overcome this figure. Thank you, Lydia.
That's really helpful. Thank you very much.
Thank you, Lydia. Now let's move to Jason Kenney from Santander. Hi, Jason. How are you? Please go ahead with your question.
Yes. Thanks very much. So maybe building a bit on Lydia's question and asking it in a different way. I'd be interested in your views on the profile for net debt to EBITDA, where it was at the end of 2014? And what kind of progression or profile you see to the end of 2015 once Talisman is acquired?
Secondly, I'm just looking at the cash flow in the results announcement. Did you restate the 2013 cash flow number? And if so, I was just wondering why that was? And then maybe finally, I know you've guided Talisman will close in the Q2. Do you think that's more likely in April or in May?
Thanks.
Thank you, Jason. Regarding the first question, let me say that I'm not going to deliver anything, I mean, of Repsol plus Talisman because I can't do that now. I mean we'll do after the closing. And now I'm going to give you the figure regarding Repsol standalone. And at the current $60 per barrel price, oil price, let me say that our forecast is that we are going to be neutral for the current Repsol in 2015 in terms of free cash flow after paying of course after financial expenses, after CapEx logically and after dividend.
Okay. Yes. I can could you repeat the second question please?
Yes. I was just looking at the cash flow statement and it looks like you restated the 2013 number by around €1,400,000,000 So I was wondering why that was?
Yes. The answer is yes. We restate the 2013 cash flow number due to the new reporting standard that is called NIIF. That's so the answer is yes. And regarding your question about the closing process of Talisman, I mean, let me say that we are to close the process as soon as possible and our commitment is to do it in the Q2 of the year.
Okay. Thanks.
Thank you. Thank you, Jason for your questions. Now let's move to Matt Lofting from Nomura. Hi, Matt. How are you?
Go ahead with your question.
Hi. Thanks a lot, Angel. Two questions, if I could, please. Firstly, just sort of coming back to CapEx. I think you talked about sort of within the development side of the plan adjustments sort of roughly 50% being related to slowing down activities versus 50% efficiency gains.
On the former, I wondered if you could just give us a sense of specifically what projects have been slowed on a view through 2015? And within that, what the status of the Perla project in Venezuela is at the moment, whether or not that's online yet and if not when it's expected? And then secondly, just if you could comment on the trajectory on a standalone basis at least for upstream depreciation for this year. I think you noted in the press release that the depreciation was around €100,000,000 higher year on year in Q4. Thanks.
Regarding your first question, let me say that no strategic project for Repsol. I'm talking when I talking about the strategic project, you know that we are talking about Lapa, we are talking about Cardon, we are talking about Margarita. I mean, no project has been slowed. The CapEx reduction has been delivered or done or is going to be done, thanks to efficiency and to a slowdown of running investment of current projects, but not I mean the strategic project. Let me only I mean underline the exception of Mid Continent.
As you know the unconventional environment is quite different. So you have the possibility to reduce or to slow down your CapEx to fit to your cash needs and to production monetization. In the current oil price scenario, we're slowing down our investment in Mid Continent. I'm not going to deliver more about this issue because I mean I have to respect the operator, Sandrich, that tomorrow is going to deliver the full figures regarding what is happening in Mid Continent. So why do we have higher depreciation in the Q4 comparing with last year?
I mean that is mainly because the higher production in Brazil and United States.
Okay, great. Thanks a lot.
Okay. Now let's move to Jon Rigby from UBS. Hi, Jon. Good to speak with you again. Go ahead with your questions.
Hello, Angel. Two three questions actually. I'll confess upfront. The first is you gave some outlook on the exploration activity and this risk profile that you're taking. You talked about number of wells drilled, split between appraisal, exploration and then frontier.
Can you just give the comps for 20 14 as well just so that I can gauge how the money is being spent year over year and maybe get some idea about the likely accounting impact of that cut in exploration, if that's possible? Some clarification. Is it likely you're able to put that some clarification. Is it likely you're able to put that into a jurisdiction where you'll get full tax shield for the interest charges that you get. So obviously, net down the cost of any debt that you issue.
If you can just maybe make some comments around that. And then I think actually oh yes, so one other thing. Is there any plan at some stage or other as you sort of deepen your position in the U. S. To upgrade your ADR listing to a sort of full listing in the U.
S. As opposed to where you are right now?
Thanks. Yes. Thank you, John. Regarding your first question, let me say that over this year, we drilled 34 wells, 12 of them were positive, 8 are now under evaluation and the rest, I think that is 12, 8, 14, I think they were negative, the rest. Regarding the positive, let me stress, I mean, Leon in the Gulf of Mexico, Seaat II in Brazil, Basking II and of course the successes we had in Alaska and in Russia in West Siberia.
Regarding the tax shield of the interest charges, there is not limits to tax deduction of interest charges. So I mean that we could make the deduction of operating regarding this issue. And regarding the glass question, could you repeat it please?
I was just wondering whether, I guess as you deepen in the OECD and build your upstream business, whether you will also upgrade your U. S. Listing to a full ADR sort of in comparison or comparable with your peers?
Yes. Sorry, John. I didn't know the last one. Yes, it's a possibility that we are analyzing now and will are going to make a decision after the closing of Talisman.
Okay, lovely. Thank you.
Thank you, John, for your questions. Now we move to Hamish Clegg from Bank of Merrill Lynch. Hi, Hamish. Please go ahead with your questions.
Hi, guys. Thanks for taking my question. I had two quick ones for you. Firstly, just in the refining business, I know you're I mean a fantastic quarter demonstrating how well the refinery is performing. One of the things you started off the call was saying the performance was due to 2 things.
1 is obviously your improvements and 2 is the better environment. Do you think you could maybe give us a bit of a guide in terms of how much of the better performance is from the environment versus the improvement? And then my second question is, I know that Talisman is seeking tenders for a or putting out a tender for FPSOs on the Ka Rong Do project in Vietnam, which has sort of gone out there. I was wondering if you could tell us about how you're in advance of the deal, how your working relationship was with Talisman prior to this deal closing and your influence over development of various regions? Because whilst Vietnam is a pretty profitable region for Talisman, can we assume you won't allow the company or maybe this is impossible to commit more CapEx in less profitable regions like North America and the North Sea?
Thank you, Hamish. First of all, let me say that as you said, the Q4 was sound in for our refining business. And I know that I'm going to have problems with our IR people after saying that. But let me add that taking into account growth we have experienced in January February, the Q1 of this year is going to be even better. I don't know how it's going to take this how long it's going to take this situation, but that is the current situation.
I mean, you could even clearly know what part comes from the efficiency. I mean, if you take the margin index and I think that we have delivered the figure of the margin index. I mean this improvement is due to prices. And I mean the differential between our result we delivered in our downstream operational results and the margin index is due to a higher efficiency. So I think that more or less we have been able to earn 1 $500 per barrel over our refining index over the last quarter.
So taking into account that we are distilling more or less 20,000,000 barrels per month, 60,000,000 barrels, I mean, in operational terms, we could think that €90,000,000 more or less came from the efficiency difference. And regarding the new projects Cartagena and the upgrading of Petronor from the full of the total refining index $3.6 per barrel comes from the upgrading of both projects. Okay. Ravi, sorry. Regarding the second question, it will be fantastic to have the opportunity to answer you about this question, but you have to understand that I can't I mean, taking into account that nowadays Talisman is a different company and we have to respect the legal issues regarding our relationship now with Talisman before the closing.
I'm not able to answer anything regarding this question. Anyway that is nothing to do with I mean the relationship between both companies, but let me say that I had the opportunity to know in a direct way, because I visited Southeast Asia with Mr. Karra, who is a person managing our upstream businesses 2 weeks ago. And I had the opportunity to know on the ground that the relationship of Talisman in this area is really good and okay.
Brilliant. Thank you. Okay. Thank you very much, Hamish. Now let's move to Shriyun Banerjee from Barclays.
Shriyun, I believe you're a fixed income analyst. Please go ahead with your questions.
Hi. Thank you for taking my questions. So just a couple on Talisman. After the Talisman acquisition, would RevPAR guarantee Talisman's outstanding debt? And then what are your thoughts on Talisman debt going forward?
Would you refinance from the Repsol level as it matures? Thank you.
I'm sorry to repeat that. This is a decision that we are going to have in any case after the closing of the taking over process with Talisman. I'm sorry, but in legal terms, I couldn't deliver anything more regarding this issue. Thank you. Okay.
Thank you very much.
Thank you. Now let's move to Irene Himona. Hi, Irene. How are you? Always nice to speak with you.
Go ahead with your questions.
Good afternoon. Thank you. Just one actually going back to the Downstream, if I may. And looking at Downstream, excluding the North American Gas business, so if you like the genuine Downstream, you had a fantastic year. It was the highest for the full year, it was the highest EBIT since the peak in the cycle back in 2,007, 2,008.
So I wonder what in giving us sort of guidance for reps of standalone being, let's say, cash neutral in a world of $60 with a reduced CapEx. What are you budgeting? What is your expectation, your assumption for that genuine downstream division? And you mentioned already that Q1 is even better than Q4. But what is embedded in your guidance?
Thank you.
Thank you, Irina. Let me say let me remind you that well, you know the figure. So let me remind that the EBITDA of the full upstream businesses in CCS terms in 2014 has been €2,200,000,000 It's going to depend of course from external factors like the refining margin that you know that is not in our hands. But my best approach now to the EBITDA at CCS for our downstream businesses for Repsol standalone, it's obvious because Talisman has not downstream businesses. So for Repsol, could be at around €2,500,000,000 €2,600,000,000 for 2015.
So firstly for us, downstream, I think that is going to be a real cash cow for this coming year.
Thank you. And just to go back and clarify one thing, if I may. Can you just repeat for us what your budgeted CapEx is for the downstream in 2015? Thank you.
Yes. I think I'm not going to repeat it because I think that I don't deliver the figure. But it's going to be €970,000,000 and that's more or less due to the I mean €700,000,000 €750,000,000 is our running business investment every year in our downstream businesses including the efficiency investment plus what we are going to invest in the upgrading of our Pampillas refinery that you know that we launched that project in 2025.
Okay. Thank you very much. Very clear. Thank you.
Thank you, Irene, as always. Now let's move to David Gamboa from Tudor Pickering Holt. Hi, David. Go ahead with your questions.
Sense
on where you guys are going to focus your exploration activities, get a sense on where you guys are going to focus your exploration activities going forward. You mentioned Angola where we've got a couple of results last year, but not clearly commercial. You mentioned you're going to drill 2 wells in Angola this year. You said Block 22. Have you dropped the well that you're going to drill in Block 37?
Are you still going ahead with that? And do you have any update on the Locoso well that's being evaluated? On the same side of things, you mentioned the Alaskan appraisal program this year. And I think you mentioned that you were thinking about development project in Q1 2016. Can I just confirm that date?
And how do you see the Alaskan do you need the well results in order to progress with an FID over there? Or how should we think in the Alaskan timing over there? Thank you. [SPEAKER RAMON ALVAREZ
PEDROSA:] Yes. Thank you, David. Let me say that regarding the block B-twenty two, I mean, the Locoso well, that was the first one, I mean, is now under evaluation. So this well is going to go in the same directions. Regarding the other wells where we are not operators, I'm talking about the B-thirty seven and the B-thirty five blocks and the last one is E and I, the operator.
We have I mean, no news about the drilling now. Regarding Alaska, I mean, I can't confirm because you know that we are going to drive 3 wells this year to a price as an appraisal of our discoveries in the area. So in order to know in an exact way, I mean, the resources we have in the area and the feasibility of the development plan, we have to wait for this the conclusion of these 3 wells. Now these days, we are starting the first one, but I think that we are going to be able after drilling these 3 appraisal wells to prepare and to deliver with a high probability development plant development plant, sorry, that we will deliver and we'll launch the FID probably in the first quarter of next year in 2016.
Thank you. Thank you very much.
Thank you, David. Okay. Thank you. And now move to Brendan Warne from Bank of Montreal. Hi, Brendan.
Go ahead with your questions.
Yes. Thank you, gentlemen. It's Brendan Warne from BMO Capital Markets. Just two questions. Just the first one on obviously we're in a $60 oil price environment.
Can you just make a comment on And then And then just second question relating to call it a $60 oil price environment. And if you can make any further comments related to the Talisman acquisition again if possible. Just your statements about the IRR of the acquisition being above WACC and also what your expectations for EPS are once the deal has closed? You said it would be neutral for 2016. Are you able to restate that?
Or will you be restating those estimates?
Yes. Regarding our Yes. Regarding our marketing businesses and marketing sales in Spain, let me say that the growth year on year in 2014 has been at around 2% more or less the full sales of our marketing business in 2014. Sorry, I have to check this figure. Excuse me.
Sorry, I haven't got the figures now with me. But I think that the full figure regarding the sales of our full marketing business has been a growth of about 2% this year. Regarding 2015, we have to think that the general the framework of economic picture in Spain and Portugal where we have a main part of our downstream sales is improving and we expect to have a small growth at around 1% more or less on the sales in the sales of our 4 downstream businesses in Spain and marketing businesses and more or less keep growing our margins in this business. Regarding Talisman, let me say that we said in December that this transaction in terms of earning per share was accretive for 2016 2017 depending of course of the price deck. You remember that we said at that time that in our own price deck it will be accretive in 2016.
And in an asset price deck the activity will come in 2017 and we maintain what we said in December in terms of profitability of the acquisition of Talisman, we maintain what we said in December. Thank you.
Yes. Thank you.
Okay. Thank you very much, Brendan. Now let's move to Birrah Bojatarya from Royal Bank of Canada. Hi, Birrah. How are you?
Go ahead with the questions.
Okay. Thanks. Thanks for taking my question. I just had a quick one on the U. S.
Onshore. So in the Mid Con, could you just remind us of your current activity, how many rigs you're running and directionally where you expect that to go in 20 15? And also your CapEx budget for the region? Thanks.
As I said before, I mean, we are reducing the number of rigs in Mid Continent. I mean, the evolution is going to depend of curve of the oil price in America, the West Texas, in the world, of course, but in local terms, the oil price in the area. And let me say that I have to respect the operator and tomorrow, Sandvich is going to deliver the I mean the forecast of investment for coming months and I have to respect the opinion and I have to respect the press conference or the conference with analysts that SandRidge is going to deliver tomorrow. I know of course the figures, but I have to respect their I mean their timetable. Thank you.
Sure. Thank you.
Okay. And thank you, Birrah. Now Neil Mortom from Investec. Hi. Neil, how are you?
Go ahead with the questions.
Thank you very much. Good afternoon, everybody. Just two quick questions hopefully. Firstly, going back to the free cash flow neutrality for standalone Repsol in 2015. You talked about that being after dividends.
Are you assuming a script dividend within that statement? And if so, what proportion of take up are you assuming? And then just secondly, a quick question on the cash flow statement. In FY 2014, there was a big increase in other financial assets. Just wondered what that was, whether it was simply you sort of parking liquidity into other short term liquid investments?
Thank you.
Yeah. Regarding your first question, the answer is yes. And indeed, yes, I'm assuming more or less a 60% of acceptance. And excuse me, could you repeat, Neil, your second question?
Yes. It was just with regards to the cash flow statement on page 32 of the release. There's a €1,600,000,000 investment in other financial assets during the course of 2014. I just wondered what that was?
Yes, they are full liquid short term deposits.
Okay, great. Thank you.
Thank you.
Hi, Neil. Thank you for your questions. And with Neil Moton, we have finished this Q and A session. You know that in the IR area, we are your entire service for further queries you may have or any clarification you may need. And thank you very much.
Thank you. Cheers.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.