Hello, and welcome to the Respal Second Quarter 2018 Preliminary Results Conference Call. Today's conference will be conducted by Mr. Josu Jean Yima, CEO. A brief introduction will be given by Mr. Ramon Alvarez Pedrosa, Head of Investor Relations.
I would now like to hand the call over to Mr. Alvarez Pedrosa. Sir, you may begin.
Thank you, operator. Good afternoon. On behalf of the company, I would like to thank you for taking time to attend this conference call, setting out the company's 2nd quarter results for 2018. This conference call and associated webcast will be hosted by Joseon Imas, our Chief Executive Officers, with members of the executive team joining us here today in Madrid. Before we start, I advise you to read our disclaimer.
During this presentation, we may make forward looking statements, which are identified by the use of words such as will, expert, expect or seminal phrases. Please note that actual results may differ materially depending on a number of factors as indicated in the disclaimer. I will now hand the conference call over to Joseph John.
Thank you, Ramon, and thank you to everyone online for attending this conference call covering our Q2 results. Before taking you through the detailed explanation of the quarter, I want to start by announcing that according to the news release earlier today, Miguel Martinez is retiring from Repsol and Antonio Rento replacing him as CFO of the company. Antonio was previously our Corporate Director of Strategy Control and Resources. Antonio has many years of experience in the oil and gas industry and has been member of Repsol's Executive Committee since 2015. In addition, Luis Cabrera has been appointed new Executive Managing Director of Technology Development, Resources and Sustainability.
And Luis will be replaced as Executive Managing Director of Exploration and Production by Tomas Garcia Blanco, previously the Executive Director for Europe, Africa and Brazil E and P Business Unit. Let me now hand the conference over to Miguel. But before, let me say, Miguel, that today is not only a relevant and important professional event today for me. It's also important in emotional terms and difficult in emotional terms. You are not only a CFO of the company.
I have worked with you over the last 10 years. It has been for me an honor to work with you. It has been an honor to give to take you as a member of my team over the last 3 years. And let me say that I have learned a lot over all these years from you, Miguel. So thank you.
Thank you for your support. Thank you for your help. Thank you for your commitment with the company. Thank you for supporting me also in personal terms over these years and good luck Miguel in your personal life from now on. Miguel, you have the floor.
Thank you, Jose John, and good afternoon to everyone. Just want to take a moment to say farewell to everybody online as this will be my last results conference call. After 13 years as part of Repsol Executive Committee, the last 7 in the role of CFO And with the foundations of Repsol's new strategic plan already defined, I think it's an appropriate time for me to retire. I have been very fortunate to spend most of my professional career in Repsol and it's here where I want to retire. Family, chess and other hobbies will not be a priority in my life.
I would like to wish you all the best to everyone joining us in this call today. Thank you all of you for your help, collaboration throughout these years. Josu Jon will now continue with the rest of the presentation. Thank you very much.
It will be great, Miguel, if in between just play game and your golf, you could reserve some minutes to have a coffee with me from time to time. Thank you, Miguel. So I will now continue with today's call in which I like to cover the following principal topics. Firstly, a summary of the key messages and main operational highlights for the quarter. Secondly, the financial results.
And finally, an update of the outlook for rest of 2018. Let me now start by reviewing the key messages from the quarter. After delivering in just 2 years on all the key strategic objectives of our 2016 to 2020 strategic plan, last June we presented our revised targets for the 2018 to 2020 period. Following the divestment of our remaining 20% stake of Casa Naturale executed last May, and of course supported by the strong foundation of financial flexibility and a sound balance sheet, our updated value proposition adds the concept of growth to our objective of providing value and resilience under any price scenario. Our 20 18 to 2020 investment budget increases to €15,000,000,000 a 35% rise compared to the previous 3 years period.
A total of €11,000,000,000 will be invested in the core upstream and downstream portfolios and an additional €4,000,000,000 will be devoted to expanding the downstream and to building a new low carbon gas and power business. The expected €2,500,000,000 investment in low carbon to 2020 includes the €750,000,000 acquisition of the hydro and CCGT generation assets and of course, the retail business of Piesco. The transaction is expected to be completed in the Q4 of the year once all regulatory approvals have been received. Net debt stood at €2,700,000,000 at the end of June, a €4,100,000,000 reduction compared to the previous quarter, mostly driven by the €3,800,000,000 received for Gasnatt and prior to the payment of funds for the Piesco transaction. EBITDA amounted to €2,000,000,000 in the Q2 of 2018 and at total EUR 3,800,000,000 in the first half of the year.
Going now into the operational details of the 2nd quarter at the macro level, the positive impact of a higher crude price continues to be partially offset by a weak U. S. Dollar. Upstream production averaged 722,000 barrels of oil equivalent per day, in line with the Q1. Planned maintenance in several assets offset the impact of higher production in Peru, increased volumes in the Marcellus and the ramp up of regan.
Average production in Libya remained close to plateau at 38,000 net barrels per day. In July, a security situation in the El Sadara field cost production to be 10 days ago initially reduced to around 120,000 gross barrels per day, gradually improving to the current. Today, we are producing 220 1,000 barrels level and closer in this ramp up to the 300,000 barrels per day produced prior to the incident. For the first half of twenty eighteen, total upstream production has averaged 724,000 barrels of oil equivalent per day. On the development side, work has continued at Bounga Pacma in Malaysia, which achieved first gas early 2, 3 weeks ago.
This project is expected to produce around EUR 160,000,000 gross standard cubic feet of gas per day, enabling the PM3 asset in Malaysia to meet its gas delivery commitments for the coming years. In exploration, a total 5 wells were finished in the quarter, of which 3 were declared successful, while the remaining 2 were deemed negative. Moving now to the Downstream division. The refining margin indicator averaged $7.20 in the 2nd quarter, helped by stronger middle distillates and gasoline spreads compared to the previous quarter. The average utilization rates in the distillation and conversion units were impacted by scheduled maintenance at the Tarragona refinery that was complete in June.
With that, we have finished our planned maintenance program for 2018, allowing our refining to take advantage of a healthy demand and a more favorable spreads forecast during the second half of the year. The petrochemical business have faced a challenging quarter as a result of our worst international environment, but mainly because the multi annual turnaround of the Syner's cracker. The shutdown of the cracker during the full quarter combined with operational issues we had in April in the cracker, in the dairy baked units impacted the quarterly business performance. Having solved these incidents and with the turnaround already completed, the plant all the Sines plants are back at full operations since last week. We expect, for instance, a significant improvement of our chemical business during the second half of the year.
Finally, compared to the Q1 of 2018, the marketing business contributed an improved result, thanks to higher activity in our service stations in Spain, while LPG and Gas and Power this spring negatively impacted comparing with the winter by seasonality. Moving on now to the financial results, I will summarize the main figures for the Q2 of the year and how they compare with the same period of 2017. 2nd quarter 2018 CCS adjusted net income was €549,000,000 €104,000,000 higher than in the same period in 2017. Upstream adjusted net income was €360,000,000 a €245,000,000 increase compared to the Q2 in 2017, driven mainly by higher realized prices in the oil case, higher production volumes and lower amortization rates, partially offset by higher taxes and a negative exchange rate effect. In the Downstream division, the CCS adjusted net income was €337,000,000 in the quarter, €92,000,000 lower than in the same period of 2017, mostly due to lower results in chemicals affected by the shutdown of the Sines cracker, lower margins in Peru and the negative exchange rate effect.
These impacts were partially offset by better results in refining in Europe, marketing and trading. In corporate and others, the adjusted net income decreased by €49,000,000 compared to the Q2 in 2017, mainly due to adjustments to the corporate results due to intra group crude oil sales. I'd like to underline that these adjustments will be recovered back in the P and L of the Q3. So it's a temporary effect. At the net income level, 2nd quarter results were positively impacted by the capital gains from the disposal of Gas Naturale and from extraordinary results due to the impact on financing instruments of the unhedged fluctuations in the dollar euro exchange rate.
These positive gains have been partially offset under principles of prudent accounting by additional impairments and provisions in Venezuela. For further detail on Repsol's results, I encourage you to refer to the financial statements and accompanying documents that were released this morning today. Finally, let me now finish with some comments on the outlook for the remainder of the year. Our revised CapEx forecast for 2018 amounts to around €4,000,000,000 of which around €2,300,000,000 in €2,700,000,000 in dollars will be invested in Upstream €900,000,000 in Downstream, in euros and €800,000,000 in the new low carbon business before the end of the year. Upstream production is expected to stay at around 715,000, 7200 and 20,000 net barrels per day, subject to the fluctuations in Libya.
In the Downstream business, we are expecting the refining margin indicator to stay around $7 on average for 2018. And with all planned maintenance for the year already completed This quarter, our refining system will benefit for having all the situation and conversion capacity available and our current forecast expect to generate a premium in the real CCS margin during the second half of the year. In the Chemicals business, following the restart of the Syne's cracker, we expect this half of the year a significant improvement of results during the second half of twenty eighteen. For a total EBIT of around €350,000,000 as our best guidance for the whole 2018 year. The digitalization program is progressing, is on track and is being deployed across the whole organization.
As of today, there are 120 ongoing projects that will allow the company to move towards the targets set for 20202022 in cash terms and in P and L terms. The efficiency programs are also progressing according to plan and expected to achieve the annual objectives in all divisions. Up to June, the saving post in the businesses reached 45% of the total 2018 target and the cost evolution of the corporate perimeter is aligned with the year end objective. On the financial side, we expect a partial and weakening of the working capital build up we have experienced in the first half of the year, driven by unnormalization of the level of stock in the industrial businesses. Full year, EBITDA is forecast at around €7,900,000,000 Finally, as of the end of June, Repsol have purchased 6,000,000 shares to be amortized in the share capital reduction approved by the Annual General Meeting in May.
The remaining shares to reach the total 68,800,000 shares issued with this year's 20 this year's scrip will be bought under a buyback program later in the year. In conclusion, based on our performance in the first half of the year, we remain on track to deliver on our targets for 2018 while working on the updated strategic objectives to 2020. During the next 3 years, we aim to deliver value growth based on improved shareholders' returns, increase the profitability across our portfolio and we expect to build a low carbon gas and power business, funded by organic cash flow and the proceeds received from the disposal of our stake in Gasnad, under a conservative Brent price scenario, we will be able to increase our CapEx, grow our shareholder remuneration by 8% annually and implement a share buyback program to offset the dilution associated with the script. Looking into our full year 2018 results with no more major maintenance plan in industrial businesses, we expect a stronger contribution from the downstream in the second half of the year, while the upstream continues to benefit from the recovery in crude oil prices. With that, I'll now hand the call back to Ramon, who will lead us through a question and answer session.
Thank you.
Thank you very much, Yoshijon. Just let me say that in case you run into technical problems during the rest of the Westcott webcast or conference call, Please address any problem to our e mail address investorsrelationrepsol.com and we will contact you immediately to try to solve it. Before moving on to the Q and A session, I'd like the operator to remind us of the process to ask a question. Please go ahead.
Thank you, sir.
Thank you, operator. Let me move now to the Q and A session. Our first question comes from Oswald Clint
at Bernstein. Good afternoon. Thank you very much for this. I wanted, Jussi, John, just a clarification on your commentary around refining margins for the rest of the year. I think initially, you said you expected some strong strengthening in the second half of the year for spreads.
But then you said you expect a $7 per barrel average number for the year. And I guess you've been pretty close to that number for the first half. So is that really saying 2Q levels should be sustainable through second half twenty eighteen? Or is there some type of spread you're looking at or some product tightness that could take those numbers higher? That's my first question.
Thank you. And the second one was, I mean, just back to your commentary at the beginning about capital investment, your EUR 15,000,000,000 I guess, we saw that in Madrid a couple of months ago, but I guess that was all done at $50 oil prices. And I just wanted to know, as you look at $70 oil prices today and prices holding at that level, are you tempted? Or are you seeing some other opportunities whereby you might want to potentially spend more money on? Or is there more developments in your portfolio in the upstream specifically, you potentially would kind of look at sanctioning?
That's the second one. Thank you.
Okay. Thank you, Oswald. Talking about the refining margin, we expect in our own system a $7 per barrel for the whole year as an index of the margin. But because we don't have we don't expect any shutdown, any maintenance turnaround in the second half of the year, we think that in real terms, we could be in our internal margin, I mean in the delivery to the market, we could have a premium of €0.40, €0.50 over this 7. I mean the index will be 7 for the whole year, but we think that we are going to be able mainly in the second half of the year to have a premium over this figure because we don't have any maintenance plan for this half year.
And we have, let me say, the machine fully prepared to capture the margins that the market could give us. Talking about the capital investment, I mean, you remember a lot of you that in the road show last month, I underlined the message that this additional cash coming from the oil price was going to be offset by the building of the inventory related to these new prices. That has happened in this half of the year. Talking about the 70s, I mean, first of all, we have to see what's happened. But let me say, I'm going to be very present in any case in the capital discipline of this company.
And even being at $70, dollars 75 per barrel, I mean every new that the upstream project has to show has to really show that they are going to be able to make positive net present value in a flat scenario of $50, dollars 55 per barrel for the future. I mean, because we are prepared to take the windfall coming from the market now, but I think that we have to be very prudent about the future And we are going to apply a very strict and narrow financial capital discipline in the company. In case of having this extra cash in coming months or in the coming year, as I said when I presented the strategic plan, we are ready to accelerate some projects that are today profitable and we have on track in organic terms. On top of that, I mean, as I said before, in case of not having these projects or having additional cash, we are ready to proceed to an additional buyback process at the end of the period. Thank you.
Thank you. Thank you, Paul. Our next question comes from Biraj Borkhataria at RBC.
Hi, thanks for taking my question. I had one question on Chemicals and the weakness there. I think previously you've talked about the 2018 EBIT being around €500,000,000 for the year. Could you just provide a bit of sensitivity? I think that was based on a $60 rent scenario.
How when rent price assumption specifically? And then what is the impact of the additional maintenance there? Can you split out those two factors? And then secondly, just going on Venezuela, could you just give provide an update on any changes to the net receivables balance this quarter? Thanks.
Yes. Thank you, Biraj. I mean, first of all, talking about the chemical business, let me stress and underline that the main effect has been temporary in this quarter. Temporary due to these effects, 2 effects. The first one has been operational.
I mean, we have an operational service problem in our compressor in Sines in April. We have taken advantage of this problem to proceed to the turnaround maintenance program of the cracker. Today, everything is in operation. But on top of that, we have also experienced a temporary effect of the oil price increase over the period. Because I mean, the main part of our polyolefins contract, they have contract and established prices and seeing the price of the naphtha going up, the margin has been reduced in international terms.
This effect, I mean, in an stable $70 per barrel flat period is going to be offset by the normal conditions of the market. Today, our chemical business is less vulnerable to the oil price that we were 4, 5 years ago because I mean, a 50%, 55% of today feedstock in our chemical plants, IKasi. I mean it's LPG, is ethane streams coming from our refineries and so on. That means that I mean, in case of being at $70, dollars 80 per barrel oil price, we could have a small impact on our results in the chemical business due to the competition of the crackers coming mainly from North America. But this effect is going to be very mitigated by the gassy feedstock we have now in our crackers.
So the effect has been mainly temporary in this quarter due to the shutdown of Sines and due to this temporary effect coming from the price of the naphtha. Going to Venezuela, as I said before, we have taken advantage of the positive financial results to reduce our exposure to the country. Today, the whole exposure we have to Venezuela taking into account equity, financial loans, receivables and so on is in euros 795,000,000 that are more or less $890,000,000 or $900,000,000 That is the total exposure we have to Venezuela. And I want to remind you that at the end of 2017, this figure was $1,700,000,000 the total exposure. So we have reduced this exposure in a significant way.
Over the last months, we don't we haven't received receivables or payments from Venezuela. We are being proud in covering, of course, these dispositions. And I mean, we have the hope that we could have a cargo this in coming days. But I mean, I prefer to be prudent and before having any kind of real payment being prudent about that. In any case, our current position to Venezuela is in free cash flow terms neutral.
Thank you.
Thank you, Elias. Our next question comes from Thipan Jotinigang from Exane.
Yes. Hi, good afternoon. I had a question just in terms of could you run through what regulatory approvals are needed to close the Virsego transaction, please? And then when you think about investing the €2,500,000,000 in New Energy, should we now think about that being more front end loaded through 2019 or do you think this is still sort of equal installments through the rest of this plan? Thank you.
Thank you, Thipan. I mean, first of all, the transaction of Biesco requires 2 main approvals from different agencies. The first one is the antitrust Spanish authority. And the second one is not for us, it's for the company that is selling the assets of Viesco, the regulatory authorization for the coal curve out. We don't anticipate any regulatory barrier towards Biesco acquisition because I mean it doesn't increase the market concentration as involved parties.
We don't have overlaps. So we expect that we could have the approval of this transaction in 3, 4 months maximum. So at that time in October, November, the integration of these assets in Repsol will be complete. Talking about the capital for the low carbon businesses. I mean, the best approach for this year is that we could apply a CapEx of €800,000,000 in the whole year in this kind of businesses, including here the acquisition of Biesco.
And let me repeat a message that I had the opportunity to express to the whole analyst and also I think that personally to you, Tipan, in the previous roadshow. I mean, we are going to be very prudent applying this capital. The current view we have is EUR 2,500,000,000 over the whole period, EUR 20 18, EUR 20, but we are going to deploy this capital perhaps in the time in a more prudent way because it's going to be mainly organic from now on. That means that we are going to need some time to develop these projects. And the condition we are going to put to this project is going to be a significant and high return.
So I don't have any doubt that in case of not having the returns we are going to ask to these kind of projects, we are going to go in a slower way. But our best forecast for the period is EUR 2,500,000,000 from 2018 to 2020, including the acquisition of Piesco. Thank you, Tippen.
Thank you.
Thank you, Tippen. Our next question comes from Peter Low at Berenbergen.
Hi. Thanks for taking my question. I actually just had one on the 2018 CapEx guidance. I think you said that it was €4,000,000,000 for the year, including €800,000,000 for low carbon businesses. So that leaves about €3,200,000,000 for the rest.
Now I think you're currently annualizing well below that level. So should we assume a step up in spending in the second half? And what's kind of behind that phasing? Thanks.
Peter, that is my best estimation today. But be sure, if we are able to do the same thing with less money, we'll do it. And we will be below this €4,000,000,000 But let me say today, our best approach, remember that the guidance for the whole year before, I mean, not including the low carbon business and so on was €3,500,000,000 If you add the €0.8 percent coming from Piesco and these businesses, we are in the figure of 4.3 I think that the reduction is going to come 0.1 or 0.15 from the downstream side and 0.15% from the upstream side. In the upstream side, the perimeter of the execution is going to be exactly the same. It's mainly efficiency in the execution of projects that is reducing this figure.
Some projects like the Bastian and so on, we are executing them with lower figures that expected. I'm going to go on pressing on my team and we are able to maintain the perimeter investing only €3,800,000,000 at the end of this year would be great. Anyway, my best I have to be prudent and my best estimation today is €4,000,000,000 including the Piesco acquisition in this guidance for the whole year. Thank you, Peter. Thanks.
Thank you, Peter. Our next question comes from Lydia Rainforth at Barclays.
Thank you and good afternoon and thank you to Miguel as well. Two questions if I could. On the new executive committee, I was just wondering what practical impact do you expect to see from that structure? Does the appointment of the Chief did or in terms of digitalization side, is that set to accelerate that plan? Or was it needed to facilitate the original outlook that you had in the strategy?
And then secondly, just any impact on demand that you're seeing at all yet from the higher prices in the marketing business? Thank you.
Olivia, excuse me, could you repeat the first question, please?
Yes. Just in terms of the change to the structure of the executive committee and obviously having those in terms of the in charge of the digitalization plan, was that needed to does it accelerate plan? Or is it something that was needed to really facilitate the deployment of that strategy?
Okay. So the rationale for the executive committee change, Lydia. I mean, the first, as I said, for me is I mean, the retirement of Miguel is not an easy time and easy decision. I'm convinced that Antonio Renzo, he's going to be a great CFO. But I think that that was the right time for that because I mean as I was discussing with Miguel having a coffee with him this morning, I mean, I remember that 3 years ago we had a debt of €13,000,000,000, €14,000,000,000 We were coping with the rating agencies.
Miguel and his team, they have developed a great and huge job. Today. And today being in the sound position we are with €2,700,000,000 of net debt, it was the right time for this change. And when you talk about the change of Luis and so on, I mean, I think that you are right. You know, let me say in positive terms, my obsession to create and make value in the companies applying the internal capabilities and talent we have.
I'm a believer on technology, technical development, on the digital and the improvement and the performance in technical terms of the engineering and so on. And the creation of value applying this foundation was and is one of the pillars of the strategic plan. And I think that Luis is the right guy to lead this process. I mean, he has a strong experience in the Upstream business. He's recognized as a leader in this team.
He's a former refiner. He led a lot of years ago the technological area of the company. And I think that he has the right experience to boost, to foster and to capitalize this technical and digital transformation of the company. And of course, Thomas, he's a good leader with and a strong experience in the UK, in Argentina, in YPF leading the EMP in the past. And I think that was time to prepare the future also of the company, putting leading the businesses.
I mean, people that they are younger than me, as Mavi and Tomas, either in the downstream side or in the upstream side they are. On top of that, I mean, Luis, you know that he has the lean concept fully embedded in his DNI and he has applied this concept in the upstream. I mean, I'm sure that after the huge effort that Antonio Reynoso has developed in this area over the last years, he is going to go on that. Impact of the demand in the marketing business because prices, I mean, I'm not going to say that we are not seeing or we could imagine another scenario in the future. But I mean, 4 years ago, the oil price was at $100 $1.10 per barrel.
And today, we are at $75. And the reality is that the Spanish economy is growing in the good way that the volumes over this year for Repsol, they have increased in 1, 2 points. And on top of that, we are having a significant improvement of the foundation for the business. So the demand is behaving in a positive way in the European markets and in our case in Spain and Portugal. I mean, this demand is not fully elastic as you know, and we are seeing that in the market now.
Thank you, Lydia.
Thanks very much.
Thank you, Lydia. Our next question comes from Rob Pulleyn of Morgan Stanley.
Hi. Thank you, gentlemen. So a lot of my questions have been answered, but if I can just revert back to Venezuela, I'm just trying to understand what you mean by take advantage of the current situation. But why is the adjustment the amount it is, I. E, why not larger or smaller?
Is there a specific events going on which inform the size of the write down and what could actually trigger further write downs to that remaining value? And the second question is if I can go back to IMO 2020, which obviously your refining system seems very well positioned for a middle distillate. But I'm very interested in understanding how or what you're going to do with your fuel oil yield under the IMO 2020 situation and how you see that playing out? Thank you very much.
I mean, going to the Venezuela case, perhaps in technical terms, I mean, this write down could have, let me say, some flexibility, but we have prefer to be prudent in our estimations. I mean, you know that we have some extraordinary proceedings in the P and L coming from the financial results because we were short in euros and long in dollars and we have obtained a significant result due to this unhedged position in the market. And we have preferred to be prudent and to apply all this money to reduce our exposure to Venezuela. So prudency has been the main guideline to this write down. I mean, we think that today with this 7.90 €5,000,000 of total exposure to the country, we and our auditor that is also a relevant fact.
We are comfortable taking into account the situation and the robustness in operational terms. I mean, fully conscious about the cash situation of Venezuela and the country, we are comfortable in this situation. Going to the IMO, I mean, I suppose and I want to believe and the average of the analysts think that the effect is going to be very clear in the second half of twenty nineteen, anticipating what is going to happen in 2020 on. If we apply the spreads that the analyst and the market is seeing and forecasting for the middle distillates for gasoline, for the fuel oil, for heavy oil and so on, and you apply this spreads as average to our refining system, we have an increase of margin of $3.4 per barrel in our whole system. We prefer to be more prudent, and we are estimating an increase of $1.5 per barrel for the whole system.
That means an additional cash in of €300,000,000 in refining in 2020. Why we are more prudent than the market average? I mean, because perhaps the market could have additional lanes to adapt itself. I mean, the lack of compliance is going to happen in some parts of the world and so on. So remember that we have a 6% of the European distillation capacity in refining terms today, that we own at 25% of the total coker capacity.
We only produce not significant fuel oil production in Tarragona, 6%, 7% of the whole refining production of Repsol. But we have prepared our spare capacity in our cokers in Coruna and Bilbao to transform as raw material this fuel oil, this bottom of the barrel and we are going to get rid of any ton of fuel oil produced in our European system by 2020. Thank you, Rob.
Thank you, Antonio. Thank you, Rob. Our next question comes from Matt Loftin at JPMorgan.
2, please, if I could. I mean, firstly, just on cash flow. When I look at first half operating cash flow and strip out working cap, the extent of year on year increase appears quite modest given significantly higher oil prices, production higher, refining higher, even accounting for the dollar and the removal of gas net. So could you just walk us through the variables that explain that bridge? I'm wondering whether the underlying capture of higher oil has been as good as you'd like in the first half of the year and how we should think about that on a forward basis versus sort of the $50 baseline around the strategic plan?
And then secondly, a shorter one on production. I think the full year guidance of around 7.15 suggests you're sort of expecting second half of year volumes modestly below first half. What's the sort of the main deltas there? Thank you.
Thank you, Matt. Let me say that you are, I mean, fully right and your point is very important. Because I know that the weakest point of this quarter is the cash flow from the operations. I mean I'm realizing in an open way that because even though the EBITDA figure is very positive, the problem this quarter and this half of the year has been the increase of the working capital in the company. And let me explain the rationale of this working capital downstream, €450,000,000 out of this figure is the pure price effect on the inventory.
I mean today, at these prices we have today, building up the inventory is more expensive than it was 6 months ago. EUR 100,000,000 are related to the increase of receivables from our clients because the price effect. So we have the same bills we had in the past in volume, but that is more money. EUR 250,000,000 are due to the increase of volume because the maintenance period. We need more product storage to response to the market needs when we stop, we shut down our plants.
And EUR 150,000,000 is the increase in trading activities. This figure has had also a negative impact, €90,000,000 after taxes in the P and L of the quarter. But this figure in the P and L is going to be recovered in the P and L of July August. This quarter has been significantly higher impact in the P and L because I mean, if you take the difference between the cost of producing and the sale price due to the price increase that happened in the meantime, the effect has been more significant in this quarter. For that reason, we will see again this money in our accounting in the Q3.
So EUR 950,000,000 for the Downstream, which is rational. From the Upstream side, EUR 280,000,000 in the half year is due to Venezuela, as you know. And EUR 200,000,000 comes from a lower CapEx in the first half of the year. I mean, that is surprising, but as we had a lower CapEx that in the previous semester, less CapEx means less bills to be paid. So less financing from suppliers, increasing the working capital of the company.
All these factors explain the $1,400,000,000 of increase in the half year. What may we expect from now on to the end of the year at the stable prices? We expect a reduction of EUR 500,000,000 in storage volume by December from now on. And let me say, in the worst case for Venezuela, a whole reduction in the second half of the year of EUR 300,000,000 of the working capital of the company from now on till the end of 2018. If we combine the EUR 7,800,000,000 of EBITDA we expect at this price is $70 per barrel from now on to the end of the year, combining with the €4,000,000,000 of CapEx including the acquisition of Biesco, combining with the reduction of working capital from now on till the end of the year in EUR 300,000,000 and taking into account that we have to anticipate in the last quarter apart in taxes of the recipe balls coming from the disposal of Gas Natural, €400,000,000 €500,000,000 but that is a temporary effect that is going to come back to the company from the treasury by the beginning of 2020.
If we take all these factors and of course, after acquiring the whole shares, we need to pay the whole buyback of this year, we expect a net debt at the end of this year, something in between EUR 3.2000000000, EUR 3.4 1,000,000,000 after paying the acquisition of Biesco. Of course, you know that depending on the last ship that could enter the 31 December or the 1 January, we could have a volatility of €1,000,000 €200,000,000 or €300,000,000 But €3,200,000,000 €3,400,000,000 after paying the whole shares we need to the buyback is today the best approach I have for the debt at the end of the year. Thank you. Going to the upstream and the production guidance, I mean, we are going to fulfill what we commit in the strategic plan. I mean 750,000 barrels per day is the guidance by 2020, something about 715,000, 7200 and 20,000 barrels per day is the guidance for in our budget for this year.
We have some maintenance in some of the projects in July August. We have some gas that depend in the production of the seasonal demand. Perhaps we could in this target of to be as you said 5,000 or 7,000 barrels per day lower that we are going to fulfill the guidance for the whole year. Thank you, Matt.
Thank you,
Matt. Our next question comes from Jason Kenney at Santander.
Thanks very much for taking the question. And can I just add my thanks to Miguel? If ever, Miguel, if you're in Edinburgh, I'll buy your whiskey. My question for the resources on with the VEZCO acquisition. Do you think you'll separate out the Gas Power and Renewables division at some point?
I know it's not effective until the Q4, but I'm assuming there's kind of an EBITDA contribution that's going to come in, and you can maybe have more clarity if that division were separated out from the rest of the businesses? And secondly, on the road map for return on capital employed, can you just remind us of the upside for return on capital employed over the coming strategic plan period, please?
Thank you, Jason. I mean, of course, in coming months after closing the deal, we'll decide the whole organization and incorporate in the corporate level and in the business level of Biesco. Today, we don't have a decision about that. But let me say that what we have in Biesco today is gas and power business. And going to the power, what we have is the combined cycle side that is fully integrated in the gas chain.
And we have the hydraulic linker to the pumping that this, let me say, and perhaps is not very orthodox in technical terms, but is more today a trading tool for power taking into account the volatility we have in the Spanish pulp price over the whole day than a pure production asset. So I mean, that's going to be decided after the closing of Piesco. But the driver of the decision is going to be to optimize our position in the market, extracting the maximum value of the assets we are acquiring. You will be able to track the results, of course, at the end of the year. Looking at the capital employed increase during the strategic plan, I mean, I maintain the guidance.
We commit and we define when we presented in June the strategic plan. I mean, EUR 11,000,000,000 for the whole 3 years period, 2018, 2019, 2020 in the downstream and upstream businesses. On top of that, we are going to invest an additional EUR 1,500,000,000 in the new growing activities in the downstream. I'm talking about the lubricants, trading, the international expansion of the service station business and so on. And as I said before, this EUR 2.5 1,000,000,000 applied to the low carbon business is going to be decide depending the profitability and the return we could expect from this project.
And I said as I said in June, I mean, I'm going to prioritize the return over any need to develop or to deploy or to invest this capital in the renewable side. Thank you, Jason.
Thank you, Jason. That was our last question. At this point, I'd like to bring out our Q2 conference call to a close. Thank you for your attendance. Have a nice summer.
Miguel, thank you very much for all these enlightening years. Bye.