CFO of the company. A brief introduction will be conducted by Mrs. Maria Victoria Zingoni, Corporate Director of Investor Relations. Mrs. Victoria, please go ahead.
Thank you.
Thank you. Good day, ladies and gentlemen. This is Maria Victoria Singoni, Director of Investor Relations at Repsol. On behalf of our company, let me thank you for taking the time today to attend this conference call on Repsol's 3rd quarter results. The presentation, as mentioned, is going to be conducted by Mr.
Miguel Martinez, CFO. Other members of the Executive Committee are joining us at work today. Before we start, please I invite you to read our disclaimer roll. We may make forward looking statements, which are identified by the use of words such as will, expect and similar phrases. Recent results may differ materially depending on a number of factors as indicated on the slide.
Before I hand the conference over to Miguel, let me highlight that this is our first conference call in our new building. Even though we have made several noise trials, if you have any problem with hearing this conference call, please let us know immediately either calling the IR department or dropping an email. I now have the conference over to Miguel.
Thanks, Mavi, and thank you all for attending this conference to discuss our Q3 results. The order of our presentation today will be, 1st, highlights on the operational activity 2nd, an update on the financial situations and the steps we are taking to strengthen the balance sheet. And third, the results of the 4th. Let us start with the operational performance. Production in the Absinthe Division during the quarter was 339,000 barrels of oil equivalent per day, 20% higher than during the Q3 of 2011.
The end of the conflict in Libya and the startup of Phase 1 of the Margarita project are the main drivers behind the production increase. Libya is back at 44,000 barrels per day and Margarita has added almost 9,000 barrels of oil equivalent per day. The market demand has allowed us to test the plant operational capacity, delivering during some days a peak gross volume of 10,000,000 cubic meters per day of natural quarter, adding around 4,400 barrels of oil equivalent per day from these two assets. Production volume was reduced mainly in Ecuador with the sale of 20% of block system. For 2012, we expect to reach slightly above the committed 330,000 barrels of oil equivalent per day.
Average production, even with lower than expected production from the VPTG assets. The Luina project in Luina project in Spain come on stream on October 15, and by the end of the year, we'll have the Quinteroni project in Peru producing. Quinteroni is expected to start as planned in Q4 2012, most likely in early December to be in line with the scheduled turnaround of the Peru LNG plant. The construction activity to expand the Malvinas processing plant and the government approval to increase capacity of the Camicia Gas Pipeline will be supportive to our Quinta Roni production and future developments in the area. By the end of 2012, we will have 5 of the 10 strategic development projects in production: Margarita, which is already at plateau, while Mid Continent Russia, Lubeena Montanazzo and Quinteroni will continue to ramp up.
If we take into account that Sabinehoa, our first Brazilian producing will have 1st oil in the Q1 of 2013. By first half next year, we will have 6 out of the 10 strategic projects producing. Regarding Chapinhoa, before Colguarra, in our strategic plan presented last May, a slower ramp up than originally expected was already included and we do not expect major changes to these volume figures. On top of the 6 mentioned projects that will be on stream at the Q1 next year, there are 2 more projects in Venezuela that will start production in 2014. The remaining 2 other projects, Regan and Carioca to complete the 10 included in our plan do not add material production during the strategic plan period despite the included CapEx.
This allow to ensure that delivery of the production growth established for the period 2012 2016 will be accomplished. Moreover, our average 2013 production would be around 10% higher than the 2012 volumes. With regards to another growth project included in our strategic plan, Carbon IV in Venezuela, on August 15, we officially declared commerciality. The development plan was approved on August 20 and it will have 3 phases, starting the 300,000,000 standard cubic feet per day production by early 2014. Let me now follow with the exploratory activity in the quarter.
The Sagari well in Block 57 in Peru was successful. The estimated resources are above 20cf. In October, we start drilling MAPI, the following prospect in the block. We have had 5 discoveries in the year. On top of the above mentioned, Sagari, we had Pao de Acucar in Campos 33 block in Brazil, this one in Algeria and Cheperon T2 and Cano Rondon Este in Colombia.
With these discoveries, we have surpassed the 300,000,000 barrels of oil, equivalent yearly contingent resources target established as our exploration objective in the strategic plan. We have achieved the objective in spite of falling short in finished wells estimated at 20, mostly due to the operational setback in Alaska and delays in Libya, where several wells were initially forecasted. In order to diminish the rig availability risk, we have contracted 2 deepwater rigs, from Ocean Rig and Rowan. The first one will be exclusively devoted to the appraisal of the Campos 33 discoveries. The second one will be used mainly in exploratory campaigns in Gulf of Mexico, Angola, Namibia and the Canary Island.
In addition to MAPI, we are currently drilling 2 wells, Sajitario in Block Santos 50 in Brazil and TESO-one in Algeria. We have also finished with good results the appraisal well Carioca North in Santos 9. During 2013, we expect to drill between 30 35 exploratory wells depending on rig availability and investigate above 6,000,000,000 barrels in gross terms. 70% of the investment will target oil and drilling will take around 65% of the total budget. The investment will be mainly concentrated in the U.
S, Brazil, Norway, Canada and Peru. We are fulfilling the ACREIS replacement goals with 23 new blocks already ratified in 2012 and 9 in the process towards official award. On the refining side of the business, we had a very good quarter with an average utilization rate of 81% of total capacity. Moreover, during August September, the Cartagena coker and hydrocracker have been working at full capacity. The high levels of utilizations are due to the better margins, the end of high maintenance seasons and the previous quarter and the performance of the new units.
The October utilization rate has been around 86%. Let me now move into the financial situation. Starting with our liquidity position at the end of the quarter, we had over EUR 3,900,000,000 of cash ex Gatnet, €1,300,000,000 higher than at the end of the previous quarter. The level of committed and drawn credit bank lines was €4,500,000,000 totaling €8,400,000,000 of liquidity. In September, we issued a €750,000,000 5 years 5 months bond with a coupon of 4.375 percent, equivalent to mid swap plus 3.35 basis points.
These transactions shows that we are getting financing at reasonable rates. Several Spanish companies issued bonds around the same wing and Repsol got the best cost of finance and the net debt excluding gas a €1,800,000,000 reduction compared to the level at the end of 2011. We would like to highlight that the cumulative EBITDA excluding gas nat generated during 2012 has almost covered our investments, taxes, net dividend payments and interest and leasing expenses. Regarding the actions we are carrying out to reduce debt and improve the financial ratios and cash position of the company, First, we will continue with the scrip dividend program with the interim dividend of 2012. We had an acceptance rate of almost 64% in the flexible dividend program for the 2011 complementary dividend paid in July this year.
2nd, we have closed the sale of the LPG division in Chile and the sale of our 20% working interest in Block 16 in Ecuador during the quarter. Both transactions amounted to €551,000,000 more than 20% of the asset disposal program included in the 5 year strategic plan and generated a net debt reduction of €361,000,000 3rd, we continue with the 3rd, we continue with the process to dispose of our LNG division. Due to the confidentiality agreement we have signed with the participant companies, we will make no further comments or answer any questions about the process until a decision on the sale is made by the year end. Let me share with you that the process is evolving according to our expectations. With regards to the preferred shares conversion, our first option is to avoid shareholders' dilution as mentioned in prior opportunities.
If our LNG disposal process is successful, we could still expect a conversion but into a non dilutive instrument with the aim of giving liquidity to current tenants of the preferred shares. In conclusion, we are working on the preferred shares conversion instruments, which will depend on the LNG sales success. Moving into the quarterly results. 3rd quarter CCS adjusted net income was €486,000,000 and CCS adjusted 64% higher respectively than during the same period These results were 89% 64% higher respectively than during the same period last year. The better results have been driven by an improved performance in all of our divisions.
In the Absinthe division, the adjusted operating income was €634,000,000 almost doubling the result we obtained during the same period last year. As mentioned in the operational chapter, in addition to the Libya production performance getting back to normal and the continuous improvement in the Margarita project ramp up volumes, we started production from the Russian and the Mississippian lime operations. Despite lower Brent prices in the period compared to 2011, there are higher realization prices in the quarter due to the impact of Bolivia in the sales mix and the increase in the West Texas. Operating income was partially offset by exploration expenses, which were EUR 114,000,000 higher than during the same period of 2011. Higher depreciation charges due to the production increase also negatively affected the results.
In the LNG division, the adjusted operating income was €189,000,000 75 percent better than during the same period last year. The increase was due to higher commercialization margins. In the Downstream business, the CCS adjusted operating income was €307,000,000 47% higher than the Q3 of 2011. The good performance comes mainly from the refining business where the gasoline and middle distillate differentials as well as the lowest quality of the new crude slate and product yields due to the Cartagena and Bilbao new units have delivered an average margin of $6.4 per barrel during the quarter. The premium on the margin from the new units developed favorably during this quarter with a $1.6 per barrel average going from $1.2 in July up to 2.2 dollars per barrel in October.
This increase in the margin premium of our refining system highlights that when the market is running smoothly, we are able to capture a higher premium. The good performance of the refining business has been partially offset by the weaker petrochemical environment. The increase in naphtha prices affected by an unfavorable exchange rate along with the decrease in demand and margins in some of the products were the main reasons behind the weak performance. The LPG results and higher volumes in the wholesale marketing of petroleum products partially offset the decrease in margins and the 12% decrease in volumes in the retail marketing division, delivering an overall stable result. In relation to Garde Naturale, the adjusted operating income of €231,000,000 was 16% higher than during the same period last year.
The increase is due to improved results in the Latin America operations and better margins from the natural gas sales. Financial expenses ex gas nat during the quarter were €156,000,000 72 sorry, euros 72,000,000 lower than during the same period last year. The increase in interest expenses due to the step up in the interest of the preference shares and the increase on the gross debt due to the bonds issued in December 2011 and January 2012 was partially offset by the results of the hedging positions. As a recap, this quarter results are a proof of the operational solidity that is gaining momentum in the company. The We expect We expect the Existing division to continue increasing results as new projects start and the Downstream division to generate cash flow and deliver fair results.
Let me finish turning now to YPF. As explained in our previous quarterly presentation, we have initiated different legal actions as a consequence of the expropriation of YPF. We have always been open to a negotiated solution to the issues facing the Argentine energy sector. We have been forced to take all appropriate legal actions in defense of our shareholders rights as an expropriated party, even against those who may attempt to take unfair advantage of an unlawful confiscation. As a current shareholder of YPF, we are also requiring full transparency, professionalism and rigor on the management of a private company listed in the New York Stock Exchange and in the Buenos Aires market.
Thank you. And now I will be pleased to answer any questions you may wish to look forward.
Good morning, ladies and gentlemen. The Q and A session starts now.
We will start with the Q and A session. We will have first question from Haitham Rashid from Morgan Stanley. Haitham, please go ahead with your questions.
Three quick questions, if I may. Firstly, on the CapEx run rates for the year, it appears relatively sort of light. I know you've talked about in the past 4Q being a relatively sort of heavy quarter on the CapEx side. I wondered if there's sort of no change still to your full year outlook for CapEx for the group? And also what would be the main sort of driver into 4Q for the sort of higher CapEx level?
2nd question I had was just relating to the downstream and you highlighted the utilization rates into October still remaining relatively high and also the margin looking still reasonably healthy there. But how sort of comfortable are you for the rest of the year? And as we move into 2013, you've talked before, Miguel, about downstream conditions still remaining tough. I'm sort of specifically referring to the refining side for that. And then finally, just any updates on the timing of the drilling on BMC 33 with the Milos Ocean in terms of when you plan to do that next year?
Thank you.
Hi, Tim. Thanks for your questions. In relation with the CapEx one, we expect to end up the year between €3,200,000,000 €3,300,000,000 Our initial estimate, if you remember, was €3,500,000,000 and the downfall has been basically in the Downstream division. The tails from the Cartagena and Bilbao Bridge were smaller than we thought. So we have some CapEx shapes there.
And also in the estimate in the budget for the year, we have 60,000,000 dollars for projects in the new energies, which has not been covered. So basically, I would say CapEx will be totally in line with the estimates in the Upstream division and the shortfall would be between €200,000,000 €250,000,000 in the Downstream division. My estimate for the year in refining margins, I mean to predict is difficult, especially the future, but we have seen a lot of strength during October and some how a smaller margin in the last week. My estimate is we should be between approximately $5 or $6 per barrel. And finally, in relation with Campos 33.
Our estimate is that we will start up pricing at the end of next year. As mentioned in the speech, one of the rigs will be devoted to Campos 33. Did I answer you?
Yes, that's great. Thank you.
You're welcome.
Thank you, Jaisim. We have next question from Santander, Jason Kenny. Jason, good morning, and please go ahead with your question.
Thanks, Mavi. Good afternoon, Miguel. Just two quick questions really. Could you just talk a little bit about the progress you're making post the SandRidge acquisition with Mississippi Lime? And so just an outlook on production there.
And then secondly, just wanted to get an idea of whether you are still considering any other options outside perhaps just using them for the scrip dividend? Thank you.
Starting with the second one, I mean, for sure it's only my opinion. So at the end the final decision would be on the board. But in my perception, the treasury shares will go into the scrip dividend. So basically, we will increase capital and reduce at the same time the treasury stock. This is our initial idea and the one we will present to the Board meeting.
We do not discard though that depending on the LNG final results also part of the treasury stock will go into the conversion of the preference shares. But one thing is clear, those shares will not go to the market. I mean, either one way or the other, we will allocate those into the in any of the formulas, script or the conversion. The first question refers to the Mississippi Lime and well, we cannot advance much at this moment. I mean we are simply producing approximately 1,500 barrels.
So we are just starting. Right now we have 22 rigs that will be ramping up till 2018, I think, in which we'll be working with more than 90 rigs. Other comments is that basically we expect a very important ramp up of this asset and will impact really the production, but not this year, not next year. Basically we keep attached to the plan, but it's way too early because I mean it's only 5 months since we presented the strategic plan. So I don't know what else can I comment you?
Simply that probably next year would be around 6,000 barrels oil per day and that we will keep working.
Could I ask Miguel, what type of sort of capital investment do you think we should think about sort of the next year for that project and then going forward?
$700,000,000 for 2013.
Thanks very much.
Thank you, Stephen. We have now from BPI Bruno Silva. Bruno, please go ahead with your questions.
Good morning, everyone. Going back to downstream, can you please reiterate or make an update on the expected EBIT CCS adjusted for the unit for this year? And if you have any view for next year, would appreciate, particularly after these impressive results from the retail area considering the context? And secondly, on LNG, also would appreciate the guidance on operating income for this year and the next once again and looking at consensus, it looks like it was one of the major areas of positive deviations of your performance in this quarter? And that's it.
Thank you very much.
In relation with the first question, I think that the guidance I gave, I don't know if it was in March or in July, was between EUR 1,000,000,000 and EUR 1,100,000,000. I think that we're going I mean it's going to depend for sure in this quarter, but probably we will fall a little short between €900,000,000 €950,000,000 as EBIT for the Downstream division. And sorry about the second one, because we did not split the LNG, sorry about that.
Okay. Thank
you. Thank you, Bruno. We have a next question from Banquafir to Santo from Filipe Rota.
Rosa. Two questions. The first one on your guidance for production for 2013. Could you just give us a little bit more color on how much barrels are you considering from Brazil, Russia and Mississippi? I know that you already addressed Mississippi, but I would like to have a better idea what could be the contribution in 2013 in terms of production.
And the second question is regarding the resources that you are derisking next year. You're guiding €46,000,000,000 gross in terms of expression resources. Could you give us some color on the net amount that you are going to derisk next year? Thank you very much.
I mean, in relation with the first question, we normally do not split between regions or between countries. I mean, basically, the growth will come from the new projects. I think that we'll have the ramp up of Quinteroni. Guarra would be sorry, Sapinho, I would be there. We'll have also helping not with much volume, but with a lot of margin in Luina Montanafo and also we'll have for the full year Margarita.
So there you have basically the growth areas, but we do not split, I mean, field by field or country by country, okay? And the second question Was with regards to the exploration risk? Yes, we keep attached to what we mentioned in the in our strategic plan presentation. I mean, we are aiming this year between 300,000,000 and 350,000,000 barrels of resource contingent resources. So we could attach to what we said in May.
Basically, we are keeping the budget and probably the only difference with the past, if you look at it, is that most of the CapEx would be in the U. S, Brazil, Canada and Norway. So moving into more OECD countries, okay? But we did with the same approach we presented with the strategic presentation.
Philippe, 1 month ago, I mean, we put a presentation in our web page with regard to the growth contingent resources, prospective resources that were going to be investigated. We'll be holding again in January next year our exploration day and we will need more information with regards to the exploratory plans for the year.
Okay. Thank you.
Thank you. We have next question from Barclays, Lydia Rainforth.
Thanks and good afternoon. Two questions, if I could. The first one, just on the preference shares, Miguel. When you're looking at those non dilutive instruments, can you just talk to us a little bit more about what those options are? And over what time period you'd expect to get any conversion done?
And then secondly, I appreciate what you said about not giving individual company guide or country guidance. But for Trinidad, can I just ask, have you included the similar level of production for this year? Or have you got some of that recovering into the 2013 numbers? Thank you.
In relation with the In relation with the preference shares, I mean a solution which is at least the one I like most is to simply put a bond for 10 years. That sense, we will not convert any part of this preference shares into new capital and 20 13 in Trinidad and Tobago, I mean, you know it's an asset we do not operate, but our estimate is flat in comparison with 2012.
Perfect. Thank you very much.
Welcome, Lydia.
Thank you, Lydia. We have next question from Sogchen, Irene Himona. Irene, please go ahead with your question.
Good afternoon, Miguel. Just a couple of questions, please. So first of all, 6 months on from the confiscation of YPF, can you perhaps update us on your discussions with the credit agencies and the current thinking regarding your financial position? And then secondly, you had formed a strategic cooperation agreement I believe with Pemex. And I was just wondering if there's anything to report on that.
Has anything come out of that agreement, which you can talk about? Thank you.
Okay. Thanks for the questions, Irene. In relation with the first one, I mean, once YPF was confiscated, we met with the rating agencies and we present them all the measures we were going to take. And I think that we have been delivering one after the other and with better results than our initial estimates. We expect that once we sign the offer of the LNG to sit with them and this will probably will happen in January next year, okay?
And in relation with Pemex, I would say that basically is simply to recover the relation we had before August 2011. If you remember in August 2011, there was, I would say, some confusion and we are simply turning back to the initial point and share with them those areas in which we have a win win situation for both, call it using our refinance system, taking their Maya crude into our system, I mean, I would say back to basis, okay?
Thank you very much.
Thank you, Irene. We have now Oswald Quinn from Sanford Bernstein. Otho Arcline, good morning. Please go ahead with your questions.
Thank you very much. Yes, first question was just if I could get a bit more detail on the refining margin uplift sequentially. I wonder if you could say what was the uplift there just from the general margin environment? And then what was the uplift from the refinery upgrader, if it is possible to split that out, please? And the second question was on Russia and your alliance or your JV with Alliance Oil.
There's been a lot of favorable tax incentives over the summer in Russia for tight oil exploration. Is that something you're discussing with Alliance or something you would like to investigate within Russia? Thank you.
Okay, Oswald. I think that more or less I gave you the split during the speech. I mean, in July, the margin of the new facilities were not that good, 1.2, and we ended up with an average of 1.9 sorry, 1.6, finishing September with 1.9. We reached the peak by mid October at 2.44, only one day. On average, October was 2.2.
So basically, I would say that we are starting to see the returns we were expecting from the units. I think that there has been several factors there. Despite refinery so drastically, I would say. And second, we have the issue with the Iranian crude. I mean, we have to change our diet and this has also affected the performance of the sites.
It looks as if the fine tuning is already there and basically those are the figures. So you can account at least in October 2.2 for the it's a gain obtained from the new units. Your second question was in relation with Alliance. I think that with Alliance there are many projects in front of us and we are analyzing them all. And right now there's nothing special to comment other than they provide us the first asset.
The second one, it's coming this quarter and that's nefti gotcha. And we will keep working. But I'm not aware of anything related to the tax you mentioned other than we are working with them in a daily basis.
Let me highlight Oswald that the premium that Miguel mentioned applies over the total capacity of our Spanish refining system and not only of the new capacity, It's over the whole refining capacity. Thank you. We now move into next question from Royal Bank of Canada, Peter Hatton. Peter, good morning.
Two quick questions. A follow-up on the option you're talking about on the conversion of the press. Can you just explain to me, on IBM being a bit thick here, on the issuance of the bond and how that gets the press treated in a different way in terms of the treatment by the credit agencies, which was one of the areas that you're looking at? So just understanding the mechanics of that a little bit. The second one is again back to the downstream and retail volumes held up better than expected, but not so much in Spain.
They were record in Europe and there seemed to be a large jump outside Spain. I'm trying to understand that and how sustainable that is looking forward.
Thanks. In relation with the first question, the word is liquidity. I mean, a bond of Repsol will be liquid day 2, while the prefs really doesn't have a market. And the social problem we have in Spain with these preference shares is that most of them are linked to the savings banks. So we have to somehow make or take a decision to provide liquidity to these preference shares and we think that the bond is one way to do it.
In relation with volumes, in Spain, the figures of the quarter were pretty bad. I mean, volumes fall 20 11 with the same quarter 2011. And on average, throughout the year, we are falling 9% on accumulated basis. So I'm not I do not know how volumes evolved in other European countries other than Spain for sure and Portugal and Italy, but it has been a strong impact. I think also that the VAT was modified with an increase of 3% by September 1.
We said that the impact there be between a 2% and a 3%. So basically, I would say that on average, probably a 1% or 2% jump between months, but it's bad news. I mean, 12% fall within the quarter, okay?
Okay. Thanks, Miguel.
Thank you, Peter. We have the next question, Fernando La Fuentes from N plus 1. Fernando, good morning.
Hello. Good morning and thank you for the presentation. Just one sorry to come back again on the preference shares. I have one further question regarding the possibility of including the treasury shares in the conversion, how could this be structured at some point assuming that at the end the LNG business is finally solved. And second question regarding the guidance you gave in Q1 for the upstream business of an EBIT in the region of €2,200,000,000 to €2,400,000,000 I was wondering if this is still maintained or what should we expect from this business?
Thank you so
much. Well, the first one, it's simple. I mean, with the valuation of the shares, we can give one share of the treasury stock to each tenant of the prefs plus a bond and this will be the conversion. 2nd, in relation with the CapEx sorry, EBIT for the Apsi division, we keep attached to what we say. I mean, we will end up around EUR 2,300,000,000 for the year end.
But I mean, always to make guesses is difficult, but it's our best estimate today.
Okay. Just one follow-up on the first question, Miguel, if I may. Could it be possible to include in this conversion kind of an extendable bond for the distressed reserves, including kind of an issue premium or something like that?
For sure, Fernando. And we have analyzed many other options. But as mentioned before, my first idea is if possible, 100% conversion, nominal conversion into a bond, which I think is the clear solution. I think that those tenants are basically fixed income investors. So if the LNG goes in the way we expected, I think that the conversion will be through a 10 year bond or something like that.
Okay, great. Thank you so much.
Thank you, Fernando. We have next question from UBS, Daniel Eksteen.
First questions are on the Downstream. It's good to see some improved financial performance coming through this quarter. Perhaps going back to the guidance you gave at the end of July that was referenced an earlier question, I think it was €1,000,000,000 to €1,100,000,000 We're now talking about a lower number than that. This perhaps implies that your Q3 results didn't quite match your own expectations. Is that fair?
And if so, could you explain a little bit more about the moving parts within the business and where the underperformance came versus that which you were expecting in July. Following on from that, the refining was stronger, but you talked about the operating performance perhaps not being at optimal levels at the moment. Could you also talk environment is having? I'm talking about low demand and a number of upgraded refineries in the Iberian region. What impact is that having on your pricing power?
Then on a completely different note, assuming the LNG deal was complete, how would you view the scrip dividend option in 2013? If it were to continue, would there be anti dilutive measures taken? And then finally, you gave us some production guidance for this year and next, which was very helpful. Could you talk about an exit rate for 2013 rather than just the average growth for the year? Thank you.
I think that the difference between the EUR 1,100,000,000 and EUR 9 50,000,000 we are providing today has two reasons. First one refers to the chemical business, which is behaving both in volumes and margins lower than expected. The second one refers to volumes, the retail division. I mean, for sure, we were not expecting a 12% fall in the volumes of the net. And those are the main reasons for the fall.
Initial estimates of the downstream EBIT. In relation with the script, the idea is, yes, to keep it. At least it's my idea. I mean, I don't understand why some people consider this a dilutive process. What we are giving the investor is an option for free, in which if they want the cash, they have it.
For sure, it will imply some dilution, but for those who take the cash. For those who take the shares, the transaction would be accretive. And 64% of our shareholders took the shares. So I think it's a good option for the shareholder and it's for free. So we will keep attached to it.
And in relation with the
profile production next year,
I mean, 10% is what we are going to
Okay. Thank you.
Thank you, Daniel. We have next question from Credit Suisse, Thomas Powell. Thomas, good morning. Please go ahead with your question.
Hi, good morning guys. Thanks for taking my questions. I've got 3 as well. First one on Up But specifically, what I'm interested in is how do you see the group upstream margin evolve year on year in 2013 on flat oil prices? I'm assuming the overall upstream cash margin should improve from these new projects.
Secondly, on Venezuela, kind of when thinking of your current production and the future production now in the case of Carabobo and Pella, is it fair to assume that most of the sales in Venezuela is linked to the U. S. Dollar and not to the peso and therefore any price evolution is linked to the U. S. Inflation index rather than anything that is happening in And the final question, I guess, on your ideal scenario on the pressure conversion of taking a 10 year bond.
I was wondering whether you've kind of worked out what sort of savings you can achieve from this visavis interest rates? I guess, the bond will be lower than the preference share coupon, unless I'm mistaken. Thank you.
Well, starting with the last one, I forgot the first one. I would say that you can consider a saving of approximately 20%. I mean, it's more or less what a fair deal would represent. I think that over here we are somehow playing with the interest of our shareholders versus the interest of the tenants of the preps. So we'll our estimate today, but for sure depending on the evolution of our CDS is approximately 80%.
So the saving, if you consider that, would be EUR 600,000,000 20% applied to the EUR 3,000,000,000 euros we have as preference shares. In relation with the Venezuela, we mostly take the I mean, get paid in dollars. Carabobo sorry, Cardon, for example, will be 369. Dollars And I think that Yucalpa Ver is one area in which we have parking dollars and those expenses that are related to the local currency are paid in local currency. But basically, I would say that, yes, dollars.
And the first question?
What's the EBIT per barrel or the margin per barrel that we are making in the upstream business?
Okay. We don't disclose that. But one thing is clear, the mix is going in the right direction. If you compare this year with last one, the mix between liquids and gas has become higher and we expect to keep that trend.
Okay, perfect. Just one question I had. This is a follow-up. Just now longer term beyond your medium term target of 2016. Now, BG stated on last week that you're going to tender for a second FPSO in Carioca and that the tender process is probably going to start sometime next year.
So I'm assuming this is sort of something for the period just before 2020, the second carryover FPSO? Thank you.
You asked Thomas, just to be clear, you asked about the second FPSO in Cuyalluca, if it is going to be before 2020?
Yes. Just before 2020. Yes. I mean, it's going to be post 2016.
Carioca will be at the present time, we are thinking just in 1 FPSO and this will have to come on stream by the end of 2016. And the second one is contingent. So we will see. Right now, it would be only 1 FPSO in Korea.
Okay, perfect. Thank you very much.
Thank you, Thomas. We have next question from Tudor, Anish Kapadia. Anish, good morning. Please go ahead with your questions.
Hi, good afternoon. Just a couple of questions. Just a multifaceted question on the Mississippi Lime. I just wanted to get into a bit more detail. We've seen a number of companies complaining that infrastructure in so much as oil takeaway capacity being a big issue.
Just wondering how you're coping with that at the moment? Also whether the mix of oil to NGLs to gas is as expected? And also what WTI price would cause you to cut activity back in the area? The reason I ask is we've seen companies such as Chesapeake more than halved their rig count over the last quarter in the Mississippi line. So just wanted to get an idea of how you're seeing things over there.
And then the second question was on Trinidad. We've seen production weak this year. I was wondering if you could give a production estimate for next year. And then how you see Trinidad production evolving over the next 5 years or so?
Thank you.
[SPEAKER JOSE RAFAEL FERNANDEZ:] Okay. Infrastructures in the Mississippi Lane, at least in our area, in the one we have been drilling right now, it's already it was already there. So we are simply paying the fee of someone else's infrastructure and we are pretty close to those infrastructures. So even if it would be a real small CapEx there. 2nd, yes, it's way too early.
I mean, we are producing just 1500 barrels per day. But right now, the mix is the one we expected, approximately 50% gas, 50% oil. And in relation with the Trinidad production, I mean, our estimate, as I mentioned, is flat. So it would be our estimate has been to produce the same this year, though probably is a very conservative approach, but an unoperated asset and knowing that VPTT has been extremely conscious in all the maintenance and modifying the structure of the platforms, we want to be conservative. So despite considering a flat production in Trinidad and Tobago, we aim for a 10% increase in the global production of the company for 2013.
Anish, could you repeat the last question, the third question with regards the pricing, the WTI about Sunbridge? We didn't hear it quite well. Can you repeat it?
Anish. Anish. Yes.
So in terms of the Mississippi Lime joint venture, I just wanted to know at what WTI price do you look to either stop adding rigs or actually cut back on the number of rigs that you're allocating to the Mississippi Lime? You've got WTI at around $85 at the moment. Wondering what level it has to fall to for you to consider cutting investment?
I don't have the figure in my mind, but one thing I can tell you at this price is the project goes ahead. So we'll keep drilling, it's $3,000,000 per well and we we'll keep performing. But through Mavi, we will provide you the exact figure at which we will stop production. Okay,
Anish? Okay. And just on sorry, on Trinidad, in terms of your longer term production forecast, just wanted to know, are you expecting production to stay at that flat level over the next kind of 5 years or so? Or do you expect production decline in Trinidad?
I mean, there let me provide you some data. First to put in perspective what Trinidad and Tobago represents for us because it's true that the production level sounds big. I mean it represents roughly almost 40% of the total production of the upstream. But if we move down to the EBIT level, it only represents a 15% of the EBIT level. So it's those are the type of barrels with no match value.
So having this in context, I would say that we expect an increase in the existing production once all the maintenance is finished. But as mentioned, for the good or for the bad, those barrels are not the most profitable we have in our portfolio. Okay?
Great. Thank you.
Thank you, Anish. We have next question, Fernando Murillo from La Caixa. Fernando, good morning.
Hello. Good morning. My questions have been made already. Thank you very much. Thanks, Fernando.
Thank you. We have now from Merrill Lynch, Houtan Safari. Houtan, good morning.
Good morning. I have 2 areas I wanted to focus on. 1st of all, on the chemical side, which has obviously been very difficult for you. What steps are you taking to address the poor profitability in this business? And are you looking at in the medium term point point was a point of clarification.
I thought I heard you mentioned that you're looking to drill 30 to 30 5 wells in 2013. If that was the case, that represents a slightly lower number than you mentioned earlier, which was 30 6 to 40 wells. That was in a recent presentation you put in the market. I just wanted to see which wells or which areas are being affected, if that is the case? Thank you.
Okay. Thanks for the questions, Hassan, and good morning. The question about chemicals, if you remember 2 years ago, I think it was or last year, we did a lot of reduction within the business. And right now, we are analyzing which the future of this segment of the company looks like. But basically, I could agree with you that naphtha versus gas prices today, especially those in the U.
S. And in the Middle East, it's a tough area. So we don't have still any drastic decision taken, but we are analyzing the whole business. Being concerned that in one hand, the demand is quite weak in Europe and in the other that to compete with that can produce the same issue with a prime road that is 6 times lower is a tough task. And regarding exploration, I suspect that you get the data from Marcos Mosetic about a couple of months ago or a month ago.
And I mean, right now it's contingent. I mean, we are talking 30%, 35%. Imagine that Libya, for example, this year, we were expecting some wells, but at the end, we were I mean, really, I would say, expensive, those are exactly the same as the one Marcos was considering a couple of months ago. So the variance would be in small wells, most of them in Libya, I would assume, but I don't know signing me that there will be an expiration date in which we will update with our estimates for next year. Okay,
Thank you very
much.
We have next question, Luisa Toledo from BBVA. Luisa,
I have one question regarding the dividend. There's been a lot of speculation in Spain regarding the potential €1 per dividend for next year. I guess you stick to your guidance and maybe it's too early to discuss this. But I assume you would take into consideration the reported net profit for the year and take a decision regarding your the range you provided, EUR 40,000,000 EUR 55,000,000 I don't know if you could add some on that. And I'm sorry come back to the LNG.
I'm not referring to the future. Just on the strong performance in the quarter, we are aware of stronger volumes and prices. Is there anything we should take into account? Any measure you've taken in the quarter?
Thanks. Luis, in relation with the dividend, you know that this is a a proposal that the Board will put on the table and normally the Board take that decision by the end of November, the after this comment to our prior comments, those that were made. But basically, it's only you'll have to wait 20 days for the answer of that. And in relation with the LNG, I would say that there has been very good results in the quarter and that those are basically in three factors. 1st, volumes were higher.
2nd, there was less cargo sent to the U. S. Where the margins are not that good. So we got good better margins. And on top of that, there were some spot cargoes that really make very good profit.
So as a recap, better margins and more volumes.
Okay. Thank you.
This is the answer.
Thank you, Keith. Coming back now again to Santander, Jason. Jason, can you hear me this time?
I hope so.
I hope you can hear me. We can.
Good. Sorry about earlier. So good results today and well done on those. I did have a number of questions, but I'm left with 2. I just wondered have you been approached by significant sovereign wealth funds or potential industrial players to take a stake in Repsol directly?
Certainly that's been muted in the press. And then secondly a bit more operationally focused on your current drilling. Can you tell me if MAPI in Peru is of a similar pre drill prospect size to Sigari? And also if you have any update on the return to the Jaguar well in Guyana?
Jason, in relation with the sovereign funds, at least they didn't approach me, okay? On top of that, I would say that today it's quite difficult for any of the shareholders to reach any agreement due to their acquisition price. So I think that it must be difficult to be a pressman and to feel every day a newspaper. So I don't see any approach or any possibility on that. And the other option would have been our treasury stock.
But as mentioned before, we are not I mean, we are going to use that treasury stock and I would say with my first priority or possibility would be to apply this stock into the scrip dividend. And in relation with MAPI, I would say that it's a little more riskier than the Sangari, basically because the height of MAPI is lower than the one in Shagari. But we will see. I mean, we are getting close to it and probably there will be some news, let's say, before the year end. Okay?
And on Jaguar?
On Jaguar, sorry, I forgot that one. We are I mean, license to the Guyana government and things are moving in the right direction. So we expect to go ahead in couple of years.
Okay. We'll have to wait for that one. Thanks.
Thank you.
Thank you, Jason. We have one last question from JPMorgan, Nitin Sharma. Nitin, good morning. Please go ahead with your questions.
Hi. Two questions, if I may. First one, back on dividend. Miguel, I'm also willing to wait 20 days, but maybe if you could please explain, what will be the key factors that you'll consider in deciding a particular payout within that 40% to 55% payout range? My obvious focus is interims.
And second one on tax rate, you guided on a tax rate of 44% for this year. Is that for the CCS adjusted earnings? And what tax rate should we factor in for 2013 for CCS adjusted earnings, please? Thanks.
In relation with the dividend, as mentioned, let's wait for the Board meeting. I mean, I'm not going to advance a decision that is going to make by the Board within 3 weeks. And in relation with the second one, I know that there has been some people that have get confused with our indication about the tax rates. Our indication refers to the Spanish accounting system, which is Mifo. So there is a difference between the results you analyze, which are the recurrent CCS.
Versus the EMEA for results, which include the inventory gains plus all the recurrent issues. And during this month I mean this quarter, we have had EUR 120,000,000 of inventory gains plus the sale of Amodaimi and the sale of the Chilean LPG. So if you take this into account, the guidance I gave is based on the Mifo results with nonrecurring items included, which is the one I paid at the end to the Spanish IRS. Sorry about that, but I cannot provide both, okay?
Okay, thanks.
Thank you, Nitin. We have another question from Fernando La Puente, Fernando La Fuente again, N plus 1.
Fernando? Hi, thank you so much for taking again my questions. Yes, Miguel, a confirmation of the CapEx plan for the future. This year it was or you said if I'm not wrong that it was going to be kind of lower in the case of the downstream. Are the targets for the future both for upstream and downstream still valid?
It would be around 3.5, so similar to the initial estimate for 20 12. And from those, the most of it, as you know, would be in the Absence division and within the Absence division, I think it's for the 3rd time or for the 2nd time, development will take the most, while keeping at the same time the investment in the exploration, okay? All these figures are ex gas NAS.
Okay. So it's 3.5 per annum in the future, right?
Yes. 3.5 ex gas NAV, the same as we gave you last year for 2012.
Thank you so much, Miguel.
You're welcome.
I think we are done right now with the questions. If there is any pending question or anything that we have to discuss partners, please don't hesitate and give us a call. We'll be glad to take them. Thank you very much for attending the conference