Hello, and welcome to the Repsol Third Quarter 2014 Preliminary Results Conference Call. Today's conference will be conducted by Mr. Miguel Martins, CFO. A brief introduction will be given by Mr. Angel Bautista, Head of Investor Relations.
I would like now to turn the call over to Mr. Bautista. Sir, you may begin.
Thank you. Good afternoon, ladies and gentlemen, and welcome to Repsol 3rd quarter results conference call. I am Angel Bautista, Director of Investor Relations. This presentation will be conducted by Mr. Miguel Martinez, CFO.
Other members of the executive committee are joining us as well. Before we start, I invite you to read our disclaimer notes. We may make forward looking statements, which are identified by the use of words such as will, expect and similar phrases. Actual results may differ materially depending on a number of factors as indicated on the slide. I now hand the conference over to Mr.
Martinez.
Thank you, Angel, and good afternoon, ladies and gentlemen. Today, I would like to discuss something which I think is very material, if somewhat unusual. The material event was the death of Christophe de Margery in Moscow. It was a great loss for Total, the energy industry and those people everywhere trying to find solutions in a complicated world. Christophe was not just the CEO of a major oil company.
He was more than an executive. He was a leader. He challenged the industry with an enormous personality, a sense of humor and a genuine desire to work together in things. For those of you who met Christophe, you will appreciate my feelings of affection and admiration. To my colleagues at Total, I express a deep sense of loss.
But I'm also grateful that people of Christophe Christophe De Margery's enthusiasm, gift for life and common sense do rise to the top of this industry. I repeat his loss was a material event for all of us. And now let's start with Repsol's 3rd quarter results conference call. Today, we will cover 2 topics. 1st, the market environment for the quarter together with the
the
financial markets and that is still having a strong influence on them. China and the eurozone demand show some signals of weakness and therefore have reduced the market forecast of future crude and oil products demand. Volatility in the financial markets has increased. Oil supply has increased more than expected due to the fast growth in the U. S.
And increased production in Libya. As a consequence, during the quarter, we saw declining crude prices, but the quarter finished with a much stronger dollar. Being a euro denominated company, these effects hedge each other. With regard to the refining environment, we saw a recovery of the refining margin indicators throughout Europe, thanks to the weaker oil prices and a strong maintenance season in the U. S.
From which we benefit. In the last few weeks, the downward trend in Brent crude prices has continued, reaching the lowest level since November of 2020. Sustained improved refining margins are protecting us in the short term from this situation. All Repsol actual production is profitable at current price. Moreover, the current environment does not affect our strategic projects and neither our development CapEx program.
Every strategic project still to come on stream has a breakeven price below $80 Repsol faces the current environment from a very solid and low year financial position. Let's move now to the operational activity. Starting with the Apsum business, in exploration since the publication of the 2nd quarter results, 8 wells have been concluded. 5 wells with a positive result in USA and Russia, of which 3 were appraisals and 3 wells with a negative outcome in Libya and Liberia. 2 additional wells are pending evaluation Colombia and Angola.
In the Gulf of Mexico, we had good news from 2 wells. Leon, our operated ultra deepwater well, where we have found good quality oil sands with a net pay above 150 meters, we are currently evaluating the discovery. Additionally, we have also completed appraisal work at the Bakken and expect to move into front end engineering and design in 2015. In Brazil, in Campus 33, CEP-two is programmed to run a test following the drilling of Pouda Sukar, which we are responding now after encountering a healthy oil column. A test was performed in the Sagittario well in Block 50 of Santos confirming that this future is a significant discovery.
In Colombia, the offshore well Orca-one located in the Tayrona block in the Caribbean Sea is currently preparing to run a test in the target formation. In Angola, we cannot disclose information for the time being from our 1st operated well in the pre salt segment of the Kwanza Basin, named Locoso 1. The results of the well are under evaluation. In Russia, we have 3 positive wells, 31P and 32P in the Karabakhys IInd Block and K3 well in the Karabakhys IIIrd Block in West Siberia. We carry out production tests this year that confirm last year positive results.
In Alaska, we are finalizing the definition of 2 to 3 parts for the 1st development. We will have additional definition and potential confirmed from next winter drilling campaign. Currently, we continue to carry out drilling activity in the following areas. In Brazil, the Arapuca well is being drilled targeting the pre salt of the Albacore Alespe producing block. Facilities are already there.
Therefore, a discovery would be very easy to monetize. In the U. S, 2 non operated wells are active Basking North and the Marathon operated well in the Key Largo prospect. Our activities continues in Romania and in Norway. And before year end, we expect to spot additional wells in Spain, Norway, Angola, Algeria, Canada and Peru.
Finally, during the quarter, we obtained 1 new block in Algeria and dilute our stake in the Tayrona and Guajillo Offshore blocks in Colombia. Turning to production activity. During the quarter, we reached an average of 366 1,000 barrels of oil equivalent per day. The production was 6% higher year on year and 8% if Libya strip out from both is stripped out from both years. In Libya, we resumed production on the 7th July and were able to produce at 50% of our full capacity during the remaining part of the quarter.
In Brazil, we have reached production of 100 and 1,000 barrels per day in gross terms with the first FPSO and we are expecting to have 1st oil from the second FPSO this month. This second FPSO is already on location. Zapingua field will reach plateau for those for both FPSOs in the second half of twenty fifteen. Moving to the Downstream division, starting with refining. Our margin indicator was $3.9 per barrel during the quarter, higher than the $2.6 per barrel reached during the Q3 of 2013.
The increase was due to the good behavior of the spread The Distillation utilization rate was 84.8% during the quarter and the conversion capacity reached 106% of utilization. In petrochemicals, the improvement of the market environment as well as the adjustments undertaken by the business during 2013 allowed us to maintain the positive results achieved in previous quarters. Volumes in the marketing business remained stable year on year. Finally, I'd like to briefly explain Chilean company Compania General de Electricidad, CG, by Gas Natural Fenosa. This acquisition reinforces the leadership of Gas Natural Finosa in gas distribution in Latin America with the entrance in a stable and growing economy where Gas Natural Finosa did not have a presence, providing a platform for the consolidation for power distribution in LatAm and further growth in power generation in Chile.
This transaction is consistent with Gas Naturale Feneral's strategic priorities, which aim to increase its international diversification. From a financial point of view, it does not change the solid financial position of Gas Naturale having a low impact on the gearing ratio of the company. Gas Natural Genosa has reaffirmed its intention to maintain the actual payout policy and therefore considering the accretive nature of this acquisition even increased the level of dividends paid to shareholders. I will now explain our 3rd quarter earnings performance. Adjusted net income stood at 4 €15,000,000 41 percent higher than in the Q3 of 2013.
The accumulated adjusted net income for the 1st 9 months of the year is €1,300,000,000 10% higher than in 2013. On a business by business basis, starting from the Upstream business, adjusted net income was €185,000,000 in line with the Q3 of 2013. The basic differences are mainly due to increased production year on year in Brazil, the U. S, Peru, Bolivia and Russia, which resulted in a positive impact on operating income of 63 €1,000,000 lower crude and gas realization prices, which had a negative impact on operating income of 50 €6,000,000 Higher depreciation charges due to higher production had a negative impact on operating income of 42 €1,000,000 Lower exploration costs lead to an increase in operating income of €38,000,000 mainly due to lower amortization of bonds and wells. In 3Q, twenty fourteen, we accounted for 5 exploration wells with a negative outcome, Iroko 1 and Timbo 1 in Liberia and a group in Libya.
Additionally, 2 wells have been reclassified Higher taxes had a negative impact of €17,000,000 Other items such as the minority interest and equity affiliates and other costs explain the remaining differences. Turning to our Downstream division. Adjusted net income was €190,000,000 77% higher than in the Q3 of 2013. In refining, the margin improvement had a positive impact at the operating level of €137,000,000 In the petrochemical business, better margins and volumes allow us to improve the operating income by €38,000,000 The commercial business had results in line with the same year ago period. In the Gas and Power business, operating income was €47,000,000 lower year on year.
The results of the North American operations were affected by the warm season and the negative results from the hedging positions. In 2013, our results in North America were positively impacted by compensations received from suppliers for the deviation of cargoes to other destinations. Results and trading and other activities explain the remaining difference. In Gas Natural Alfenosa, €92,000,000 adjusted net income in the Q3 was of 2014 was 13% lower year on year. These lower results are mainly explained by the lower results in the gas commercialization business due to the new regulation approved this year in Spain and the sale of the telecom business carryout during the Q2 of 2014.
Turning now to our financial situation. The group net debt net financial debt at the end of the 3rd quarter amounted to €2,000,000,000 approximately €3,400,000,000 lower than at the end of 2013. Net debt over capital employed ratio stands at only 6.6%. Our liquidity position, cash and outstanding credit lines is €10,500,000,000 sufficient to cover short term maturities 3.6 times. In conclusion, operationally speaking, we continue to deliver the production growth target established in our strategic plan.
During the quarter, we received some good news from our exploratory activity, which will create further opportunities to our future growth. In Downstream, we were able to capture the improved market momentum. Additionally, I'd like weaker crude oil price environment since Repsol production is still 60% gassy, the quality and relative size of our downstream assets protects us along with the better performance of the spread of those products not indexed to crude oil prices. The negative correlation between oil prices and the dollar euro exchange rate also provides a hedge and the solid and stable results from Gas Natural Finosa are not affected by Brent price. Finally, we continue analyzing the market in order to pursue a possible inorganic transaction And probably as a result of the new macroeconomic scenario better opportunities could arise.
And now we will be pleased to answer any questions you may have. Thank you very much for your attention.
Thank you very much. And now we'll move into the Q and A session. We've also enabled chat in the webcast in order to post questions. Please use it only in the event there are connection problems on the call. You can identify it by a tab called Ask a Question.
We will address, if any, these questions at the end. Let's move into the Q and A session. We'll start with Haitham Rashid from Morgan Stanley. Hi, Haitham. How are you?
Please go ahead.
Thanks, Angel. Good afternoon. Thank you, Miguel, for the presentation as well. I actually would love to pick up on the last point that you made around the inorganic sort of opportunities you're pursuing. And just with regards to the sort of the current environment, as you say, lower price may allow you to acquire something at a more attractive price.
However, I just wanted to understand how you're finding the evolution of bid ask spreads effectively with sellers. Are you finding that sellers are willing to discuss valuations at lower oil prices or is that actually potentially providing some challenge with regards to executing on it on a transaction? My second question just relates to Libya and really with regards to sort of the more sort of medium term ability to carry out maintenance. Daily production has been sort of better than in previous months, but one of the issues remains obviously access into and out of the country and perhaps if you could say something about your ability to actually maintain production and carry out necessary work over activity, etcetera, on the fields there? And whether that might pose a challenge for you, that would be helpful.
Thank you.
Thanks, Haytham. I think that your point is right. I mean, in the short term, sellers and buyers' expectations are somehow far apart. So I think that at least 2 or 3 months with this level of prices will probably close this gap into a more feasible way to close a transaction. But I agree with you.
I mean, if you look at many of the companies have fall between 20% and 50% of their market cap. So spot price and expectations are far apart today. Having said so, if prices remain at this level, I think that better opportunities would arise, especially if we compare it with the situation we had 3 months ago. In relation with Libya, there's no issue with maintenance. I mean, no major problems there.
And the incident we had yesterday was based in less than 20 people robbing some cars. There were some shootings. So by safety reasons, we decided to take our people out. So I expect it to be a minor incident and that we can recover production short term. Did I answer you?
Haif?
Yes, that's very helpful. Thank you, Miguel.
Thank you very much. Hi, Haif. Now let's move to Felipe Rosa from Mangospiritosanto Investimento. Hola, Filipe, please go ahead with your questions.
Hi, good morning, everyone. Just two questions for me. The first one relates to your exploration and operational campaign in the Gulf of Mexico. So you had this discovery at Leon and the positive results from Buckskin. Could you just give us a little bit more information on what could be the potential of firstly the Leon discovery?
And in the case of Bergskin, what do you mean by positive? Do you think that it allowed to support your expectations in terms of resources? Did it imply an upward revision of the resources that you estimate for this area? And my second question relates to what is your outlook in terms of oil prices? What is your perception?
Is that affecting the way you are looking at your CapEx plan? You probably need to revise it soon. Do you see any potential investments at risk with the new backdrop of oil prices? And coming back to the your intention to make an acquisition, are you revising downwards your long term assumption for oil prices? Or do you think that you now will be able to make an acquisition at the previous valuations you were expecting because the sellers will adjust their prices to your new level or to your valuation?
Thank you very much.
Thanks, Felipe. Well, I don't know if I can put more light in the Gulf of Mexico results. I mean, basically in Basking, we found a net pay of more than 150 meters, but it's way too early to make sorry, Leon, to make any assessment about the potential of the discovery. We will run an appraisal well once we have rig availability and then probably we will have more light. In relation with back skin, as mentioned, we keep drilling now in the north part to really establish the pre feeding engineering plan and the design of the future development.
I think that also the distance between Leon and Bakken is lower than 30 miles. So we have to think about it and all this area is going to have development closest. So it's time to think. I cannot give you more light on that. In relation with the outlook for oil prices, I'm sure that they will flip to it as a first comment.
In relation with the CapEx, I would say I will not touch the and we will not modify our plan
for exploration. I mean, if
we start exploring today, probably oil would arrive in 8 years. So we have to look more on exploration as buying an option. And buying an option is something that has proved quite we have achieved good results through our model, which basically implies putting at risk and penalizing short term our P and L of $7 per barrel produced and we will keep attached to that. And in relation to the development and the CapEx of the developments, I would say that for sure for future developments we are taking into account the assets scenarios. But up to date, all the projects that are ongoing do not present any problems.
And for the future, we'll have to see. And finally, in the acquisition, for sure, we are revisiting long term oil prices and really having a wide band, I would say between $70 $100 to analyze any possible acquisition. Did I answer you, Felipe?
Yes, yes. Thank you very much. Thank you.
Gracias Felipe. Now we're moving to Credit Suisse, Thomas Adolff. Hello, Thomas. Please go ahead with your question.
Hi. Thank you. Buenas, Diaz. Miguel, you sounded quite excited about the point the point you just made on exploration that you said you don't plan to modify it. But if we think about lease expiries aside, perhaps it is actually better and cheaper to buy undeveloped resources than you're finding cost per barrel, if anything.
And we're not talking about big corporate deals or big asset deals that the others are referring to, but simplistic and opportunistic approach to buy undeveloped approach to buy undeveloped resources versus exploration. That's one question, if you can talk around that. And staying with exploration, perhaps can you quantify the resource additions so far in 2014 from your exploration campaign? And the final question I had was on buckskin again. You did sound quite excited about the appraisal results.
But I wondered whether your base case, which I think is a standalone joint development, I think with Moccasin or another field, whether that's still the base case or whether we should actually be thinking about as some of the industry press talked about a tieback instead? Thank you.
Thanks, Tomas. In relation with the acquisition or the M and A activity, I think that is not only the M and A of the corporation, the one that is working in the process. Also the business is totally involved in it and we are analyzing also undeveloped resources. But in my perception they are still not cheap. So in that sense, I would say, let's see how they evolve.
But the normally, I mean, within 2 months people doesn't change their mind. And I think their mindset and sellers are still thinking a world of 110 dollars So not much possibilities there, okay? In resources addition in 2014, we do not disclose that. Though I'm sure that we are doing okay. Are
you on track to deliver on your annual target so the run rate? Yes, yes. Even if nothing happened from now till the
year end, we are okay. We are okay. And in relation with vaccine, really I cannot put more light than the one I gave you. I mean, there are several possibilities there. The one that you mentioned is moccasin, but there are also other developments nearby and we'll have to see.
I mean let's do the people do his job. Let's take the results from the North Flank in Buckskin and then we'll be able to provide you more light, but it's way too early. Sorry about that. Okay. Thank you.
Thanks.
Thank you, Thomas. And now moving to Sam for Bernstein. Oswald Clean, how are you? Please go ahead with your questions.
Good. Thank you very much. Yes, maybe I think you made a comment that all of your production was economic at these prices. Could you just talk about your Mid Continent volumes? Is that also true for that portion of your upstream in the Q3?
And what happens here at these oil prices going forward? And how should we think about that growth volume growth into 2015? And then just a smaller question. Just want to make sure the Russian discoveries you have are kind of normal developments that are outside the scope of any of the sanctions? Thank you.
Sorry, did you hear me because I had the microphone off?
No, I didn't actually. Sorry.
Sorry about that. Well, sorry about that. My microphone was off. In Mid Continent, I was telling that we'll reach 11,000 barrels per day last month, which is a little above our target. And the production there is profitable at $80 I think also that we have finished the carry of our partner of Sunbridge this October.
Growth for the future, I would say that I would expect to reach 15,000 barrels no more than that in Mid Continent for next year. And in relation with the Russian discoveries, I would say first, we are not affected by sanctions. I mean, we are out of the three reasons why you have to move out there. We are not in any of these circumstances. And the development is still way too early to make any comment.
We still have to work on the appraisal phase for a while. And sorry about the microphone issue as well. Did I answer you?
Yes, absolutely. Thank you.
You're welcome. Thank you very much as well. Now we're moving to Ennish Kapadia from Tudor Pickering Holt. Hi, Ennish. How are you?
Please go ahead with your question.
Hi. Good afternoon. I had 3 questions actually. Firstly, it seems like bid ask spreads are quite wide at the moment as you mentioned. There's a number of companies that when you look at their share prices, they look in distress and like you said, they don't accept the offers that you're thinking.
Would you look to potentially go hostile for any corporates? And are you looking more at kind of asset deals or corporate deals? The second question is relating to Angola. We've seen kind of generally in the industry quite a few unsuccessful wells in the presold in Angola. It seems like on your 2 wells in Angola, the commerciality is highly questionable.
Just wondering how you think about your Angola pre salt exploration strategy sold exploration strategy going forward? And then just the last one going back to Sandridge. You mentioned that it's profitable at $80 If you look at realizations in the U. S, they seem like they're significantly below that at the moment. What makes you kind of cut back on your investment in Sand Ridge or change anything over there?
You. Thanks for your question, Hanish. In relation with the first question, we are looking at both assets and corporates. So we are trying to look anything that moves. And for sure it would be friendly.
We don't believe in hostile activity. The possibility of failure there, it's enormous. So if it's a friendly transaction, we would be there. If not, we'll have to go away and look for other possibility. In relation with Angola, I could agree with your comments, but I think that we have just drilled 2 wells there.
So it's well way too early. Remember that in Brazil, same situation happened and at the end it appears. So it's a matter of keep playing and we will see. And finally in relation with Mid Continent, we will keep our 30 rigs there working. If you ask me where would be the moment or the limit in which we'll have to stop production, I don't have the figure in my mind, but for sure it's lower than the prices we are seeing today.
So basically, I would say no hostile. We are looking asset and corporates. Angola needs more time. I mean, we have only just drilled 2 wells. So we'll have to keep trying.
And finally, in Mid Continent, we will not cut back as of today prices. Okay, Anish? Thanks, Miguel.
Very clear.
Well, thank you very much. Now let's move to Flora Trinidad, Flora from BPI. Flora, go ahead with your questions please.
Hello, 3 questions if I may. The first one a bit more generic. Considering the current prices, it seems increasingly likely that Sassi will have to sell a part of the stake. So just wondering if you are working together with them on this, the time for the refinancing is January, so it is approaching. So just wanted to see if you have any specific view here.
And then more specifically, you mentioned in the press release a new plant in Cartagena with Esquai. Can you give us just a sense of how much could be the contribution to the EBIT of these plants? And then more specific on the net debt evolution table you provide in your release in page 13. You have an income tax of $287,000,000 in the quarter alone. Does this increase, if you compare with the rest of the quarters excluding the adjustments, does this increase is basically related with just the real that you mentioned in the previous quarter because it seems a pretty wide change considering the FX change of Rial.
So just wondering if this has to do also with Libya or with other issues, if you could explain the drivers please? Thank you.
Thanks, Flora. In relation with the first one, we are not working with them. We know that the loan matures in January 2015. But I think that the main differences we have today with what we had 3 years ago was that the situation has changed in many senses. First one, we are not talking about the 20% of the company, but about the 9%.
2nd, the relation with Saphir is totally different from the one we had in the past. 3rd, also the financial situation is different. So the banks will probably react somehow differently. I cannot provide you more color than that. We are not working with them and they have showed several times in public their interest on keeping their stake here.
So let's see how it evolves. In relation with Cartagena, it's difficult to analyze the EBIT by refinery because we work with the whole refineries as a whole. So it's difficult to really assess the EBIT of a single refinery. If you ask for SK and SK EBIT, we expect it to be in annual basis around €22,000,000 which implies an internal rate of return of above 30%. And finally in the income tax, you are right.
I mean in Brazil and due to the devaluation, we have to account a fiscal loss due to the deferred taxes And also the impact of Libya coming into production make the fiscal terms tougher this quarter reaching the 48% you have seen. For the whole year, I expected it to end up at 44 percent. Did I answer you, Flora?
Yes, perfect. Thank
you. You're welcome. Obrigado, Flora. Now let's move to Irene Himona from Societe Generale. Hi, Irene.
How are you? Please go ahead with your questions.
Thank you, Angel. Good afternoon, Miguel. I had two questions, please. First on the cash flow. As you mentioned in Q3, your cash flow did cover CapEx and dividends.
I wonder if you can clarify the picture for the Q4. Understand there's been a recent change to dividend tax for retail Spanish investors and some companies are paying the dividend early as a result. Are you likely to pay the dividend in December rather than in 2015 to help them with that? So in other words, are we looking at 3 dividend payments this year and one next year? And my second question on the downstream, Obviously, a key strength this quarter.
Can you talk a little bit about the trends you're seeing in Spanish and European oil products demand? Are things getting a little bit better? Thank you.
Thanks, Irene. For sure, the dividend policy is a a Board decision. So my opinion is that we are not going to modify the schedule we have had in the past. So I expect dividends to be paid in In relation with the fiscal terms about the dividend, they basically favor solutions like the script. But answering to your question, I don't expect changes and I don't expect the Board to modify the regular payment in of dividends in January.
And related to products, I agree with you. I mean, we have seen a better demand in Spain, though quite tiny, but a better and in relation with Europe, despite the good results of all the companies this quarter, I and the result and the margins we have seen in October, which are even better than what we have seen in the Q3, I'm very conservative my approach to the refining industry in Europe, because we are still I mean, we're still long in distillation capacity. So we will see better margins, though I'm prudent in my estimates for the Q4. Taking it back taking this into account, what do I expect for the Q4? I would say that depending on Libya in with Libya in a like for like basis, I think we should do a little better than we have done in quarter.
Refining margins are a little better. Cold weather helps. I mean gas oils will have to increase margins. We'll have the full speed sappinhoa. So my estimate is and Gas and Power would do better in the U.
S. So if I'm a little optimistic in comparison with the 3rd quarter. Okay, Irene?
Thank you. Thank you, Miguel.
Thank you very much, Irene. Now we move to Hamish Kleck from Bank of America Merrill Lynch. Hi, Hamish. How are you? Please go ahead with your question.
Good afternoon, guys. Must be good to be Repsol, one of the only companies to benefit from or at least have by lower oil prices,
given your mix. But one of the
questions asked on many of the other calls has been what's the sort of rough rule of thumb leverage to oil prices
for you, which is something that all
the companies have been to oil prices for you, which is something that all the companies have been answering us? 2nd question is just on your drilling and M and A. One of the things you mentioned is the lead time on drilling having a successful drilling campaign, finding oil and coming into portfolio. How much would you consider using your successful drilling operations as a means to generating cash flow. It might not be organic, but by selling stakes in some of your discoveries that could definitely help bolster your cash position in terms of kind of cash coming into the business.
And you also said, if I remember rightly, earlier in the year, if you didn't do a deal by year end, you would look to be returning the excess capital on your balance sheet to shareholders. In the current environment, is this something you would stick to?
Thanks your question, Amish. In relation with oil price sensitivity, I'll give you something more than the oil price sensitivity. Basically after tax a dollar fall affect us approximately €18,000,000 at the I after tax results. A 10% increase in the dollar increases our DDI, our EPS by 12%. And normally oil price and dollar moves in the opposite direction.
So we have somehow a coverage there. So this is the sensitivity we have is not much. If you think that roughly if you want to make the account by yourself, you can do it mentally. From the 58,000,000 barrels we may produce in oil, take out 8,000,000 barrels to make the calculations easier, taking into account that we have fixed price in Ecuador and some PSCs. So $50,000,000 impact at EBIT level.
Once you discount taxes and royalties there, which is 60%, you will reach the €18,000,000 that I mentioned, okay? And in relation to return cash to shareholders, I asked for a period of 2018 up to 20 up to 2 years last quarter. So only and we have covered only 5 months by the year end. So I still have some room
You got some time.
All this allowed, okay? And I think that we have had good time till now not moving quickly. And in relation with selling assets, I mean, we have done some farm outs like in Colombia, but it's not the goal today. The farm outs we did in Colombia were based on our portfolio management issues, especially because it was exploration there. But we have plenty of cash.
This is also one of our advantages today. I mean, and one of our problems because financially talking is not very efficient to have €7,000,000,000 in cash as we have today. So I would say no, it's not in our idea to keep selling assets or to sell assets or part of it, not at this moment.
And you said you'd never consider hostile M and A. Can you maybe elaborate a little bit more on why you wouldn't given that can you could get the support of shareholders?
If you analyze you would realize that it's quite big. So and also it's not in our genes. I mean, we are a Pacific people and we do prefer to go hand by hand with the management and with the Board of the company. And if we can really reach an agreement, we will go for it. If not, I mean, there are so many companies out there that if it doesn't fit, we'll look for another one.
The risk of failure, it's enormous in a hostile situation.
Okay. Thank you.
Thank you, Hamish. Thank you very much, Hamish. Now I'll say hello to Alastair Syme from Citibank. Hello, Alastair, how are you? Yes.
Hello, very well. Thank you.
On your refining network, do you see much change in crude feedstock given sort of
all the changing differentials going
on in global crude markets? And do you have much flexibility to take advantage? Can I also ask what projects you're looking to FID as we head into 2015 or the first half of twenty fifteen? And finally, I'd love to know how much the Lyon well cost if you're prepared to share that? Thank you.
Sorry. In relation with the flexibility, no major changes. And we're always active managing oil supply basket. So the flexibility, I would say is more on our refining system and we take the advantage of that and we permanently look at every type of crudes that are available. In relation with your second question, projects that would have FID in the first half of twenty fifteen, let me think.
But I think that Alaska would be basically the main one that really it's important. But we have to take into account also the campaign of this winter next winter. But Alaska would have a FID next year and probably also the 3rd stage in Margarita. I would say those are the two main. And in relation with Leon, the whole cost 100% of the well was $280,000,000 280.
Okay. Thank you. And so do
you have a start?
Yes. On the crude feed sort of question, I guess my point was you're seeing an increasing availability of lighter crudes as things get backed out of the U. S. Market. Can you take advantage of that in the system?
I would say that increase in light crudes will not help as much as a basic rule. I mean, part of our advantage is that in between the spread of heavy and light. So if there's more light crude in the market, the spread between heavy and light would be lower. I mean, we can we are handling today our dieting crude 45% of heavy stuff. So basically, we would like to have a wider spread.
So if the increase of light crude comes in, logically, it will not help us. It's okay, Alistair?
Absolutely. Thank you very much. Thank you very much, Alastair. And now let's move to John Rigby from UBS. Hi, John.
It's always good to speak with
you. Hi, guys. I'll just ask 2 questions on cash and then just one on the downstream. So on cash, as you're running at the moment, you're running cash deficits for the 1st 9 months of the year if you ex out the working capital. So was thinking, are you conscious of the sort of wasting asset in terms of your strength your balance sheet strength I.
E. Is there a sort of backstop date by which you consider you need to have done a deal as opposed to when you would want to? Just related to that, on Brazil, which is now sort of held off balance sheet to some degree, I noticed that the CapEx continues to be quite heavy, obviously, because you've got a lot of work to do. Will that require more funding at any stage? Or will that effectively pay out or be able to complete the CapEx spending from its own internal funding and the Chinese funding that went in there?
And then just on the downstream, I noticed the 106.6 percent utilization rate of your conversion units and a relatively high rate of utilization for the integrated system as a whole. Are you given the refining margins that existed in the Q3, is that a good representation of a system that's running pretty much flat out?
Thanks, Jan, and good afternoon. First, I'm totally conscious about cash. I mean, being the Financial Director, the CFO of the company and having €7,000,000,000 at hand, let me tell you everyone pretend to gravitate. So, yes, I'm conscious. We have a deficit taking out all the non current or extraordinary items of €400,000,000 at the end of September.
And we already have paid the whole dividend for the year. So basically with the better expectation I hope for this quarter, we will end up with a shortage of cash taking into account that pressing. It's not that big, okay? So but we follow that really cautiously. In relation with cash in Brazil, Brazil is more than funding.
I mean, our data shows that in a regular scenario $90 will have a permanent cash availability between $4,000,000,000 dollars And in the third one, you are right. I mean, I think it's a good rate is where we should stand because basically we module the distillation capacity in order to maximize the conversion, which is where we really make the money. So I would say, yes, current utilization rates, I think it's a good one.
Just to follow-up on that Brazil comment you just made. Is are there plans at some stage to bring that cash sort of repatriate that cash? Or will it always sit in Brazil for the foreseeable future?
Well, actually what we have it's both partners have the money already in their hands.
It's through the loan process.
Yes. And we are comfortable at the present time with this situation.
Okay.
Cool. That clarified it. Thank you. Thanks.
You're welcome.
Thank you very much, John. And now Joshua Stone from Barclays. Hi, Joshua. How are you? Go ahead with your question.
Hi, good afternoon. Very well. Thanks. Given the fall in the oil price, I just wanted to just clarify on your acquisition priorities. You previously talked about a need for liquids and wanting to get more liquids in the portfolio, but also mentioned the advantage of having gas in a falling oil price environment.
Are those priorities unchanged? Or are you perhaps willing to maybe settle for a little bit more gas if the opportunity presents itself? And then in the Gas and Power part of the Downstream division, you're slightly surprised by the weakness there. Can you talk a little bit about how much you expect that to be one off and perhaps reverse over 4Q? Thanks.
Thanks for your questions Joshua. In relation with the first one, I would say liquids or gas is not precisely the most critical factor in the acquisition. We look more for really value and possibilities to generate value and also in stable scenarios. I mean meaning that by that portfolio talking we need to be more in stable countries. If you want my opinion, I think that there's more downside today in liquids than in gas, but it's just an opinion.
In relation with gas and power, it's quite difficult to make an assessment. Think that Algonquin last year, which is the reference price at a given moment reached 80. So it's very much dependent on how the weather will affect the East Coast during the Q4. So difficult really difficult to assess how the weather is going to be in the East Coast of the U. S.
Sorry about that.
Okay. Thanks.
Well, thank you very much, Joshua. And now with Joshua, we've finished our Q and A session and this conference call. You know that any further doubts or queries you may have, the IR service or the IR area of Repsol is entirely at your service. And thank you very much.