Hello, welcome to the Repsol second quarter 2017 results conference call. For your information, today's conference is being recorded. Today's conference will be conducted by Mr. Miguel Martínez, CFO. A brief introduction will be given by Mr. Paul Ferneyhough, Head of Investor Relations. I would now like to hand the conference over to Mr. Ferneyhough. Sir, you may begin.
Thank you, operator. Good afternoon. This is Paul Ferneyhough, Head of Investor Relations at Repsol. On behalf of the company, I'd like to thank you for taking time to attend this conference call setting out the company's second quarter results. This conference call and associated webcast will be delivered by Miguel Martínez, Repsol's Chief Financial Officer, with members of the executive team joining us here 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," "expect," and similar 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 Mr. Miguel Martínez.
Thank you, Paul, thank you to those online for attending this conference call on our second quarter results. In today's call, I would like to cover three main topics. Firstly, a summary of key messages and the main operational highlights for the quarter. Secondly, the financial results. Finally, an update on our progress towards key strategic objectives and guidance for the second half of the year. Let me start with our key messages for the quarter. At the macro level, the second quarter saw increased volatility in commodity prices, along with continued uncertainty around global geopolitics. The strength of North American and conventional production, together with the recovery of Libyan and Nigerian volumes, put pressure on oil price despite the decision by OPEC to extend its production restrictions.
On this background, Repsol has remained focused on delivering its strategic objectives, accelerating gains from efficiencies and synergies, whilst leveraging the resiliency of the portfolio across both upstream and downstream divisions. Progress on the strengthening of our balance sheet resulted in a closing net debt figure of €7.5 billion, reflecting a significant unwinding of the working capital buildup seen in the previous quarter. Upstream production volumes remain in line with guidance, and the exploration program delivered another quarter of positive results. Development activity has continued as planned, supporting our key projects and with a continued focus on a selective approach to capital expenditure and investment approvals. In the downstream division, the refining business completed all major planned maintenance for the year on time and on budget, and we expect to see higher conversion and utilization factors throughout the second half of the year.
The chemical business continued to benefit from investments in energy and operational efficiency and generated record levels of EBIT based on a sustained improvement in the trading environment. The commercial businesses saw another solid quarter of results, with marketing delivering in line with increased demands for products in Spain and Portugal. Let me now go into detail on the main operational highlights from the quarter. Starting with the upstream division, quarterly production averaged 677,000 barrels of oil equivalent per day, a 2% decrease versus first quarter, but in line with guidance for 2017. The sale of Ogan Komering and fluctuating gas demand in Indonesia was partially offset by higher-than-budget production in Libya. Libyan volumes averaged around 23,000 net barrels per day in the quarter, and production is currently above 30,000 barrels of oil per day net to Repsol.
In the U.K. North Sea, we delivered first production from Montrose Redevelopment Project with the startup of the Shaw and Cayley fields. Repsol holds a 30% net stake in this project, and the redevelopment will extend the life of the Montrose fields beyond 2030. In Brazil, the ramp-up of Lapa progresses on track, and the hookup of an additional production well in July has put gross production at 60,000 barrels of oil equivalent per day. In Trinidad and Tobago, we expect to achieve the first gas from Juniper in the third quarter. The joint venture's partners also approved the FID of Angelin in June, with an expected startup of production in 2019. Moving now to exploration, higher activity quarter on quarter resulted in the completion of five exploratory and one appraisal wells, with two of the exploratory and the appraisal wells being declared positive.
The Savannah and Macadamia discoveries sorry, in Trinidad and Tobago have unlocked approximately two TCF of gas in place that will support ongoing deliveries and the production plateau of our joint venture. Now, turning to the Downstream division. In refining, the margin indicator averaged $6.20, in line with our planning assumptions, and 30% lower quarter on quarter. Improving product spreads were offset by narrower heavy-to-light crude differentials. As expected, the turnaround of our conversion capacity in Cartagena limited our ability to generate a premium to the indicator during the quarter. In chemicals, the reduction in the price of naphtha compared to the first quarter, and the resiliency of international product price, especially in basic petrochemicals, allowed this business to generate an EBIT of over EUR 180 million, higher than in the previous quarter and in line with the record levels since in 2016.
Finally, the commercial businesses maintained their steady performance with another solid quarter. Marketing benefited from higher volumes, thanks to the increasing demand quarter on quarter. Now moving on to the financial results. I'll briefly summarize the principal outcomes for the quarter. Second quarter 2017, CCS adjusted net income was EUR 486 million, EUR 151 million higher than in the same period of 2016. The EBITDA at CCS stood at EUR 1.5 billion, EUR 300 million increase year-on-year. In the upstream, adjusted net income in the quarter was EUR 115 million, EUR 69 million higher than in the same period in 2016, principally due to higher realized price and the resumption of production in Libya, partially offset by the divestment of Dangote, TSP, and Ogan Komering, higher exploration expenses, and higher taxes.
In Downstream, CCS adjusted net income was EUR 429 million, EUR 51 million higher than in the second quarter of 2016, principally due to better results in trading and gas and power, growth in petrochemical margins, higher distillation volumes in refining, and higher margins in Peru. These were offset by a lower refining margin indicator and a lower contribution from LPG following disposals last year. Finally, in Corporate and Others, adjusted net income in the quarter was EUR 31 million higher year-on-year, mostly due to lower corporate expenses and better financial results, partially compensated by the lower contribution from Gas Natural, following the reduction in our equity stake. For further detail on the company quarterly results, along with detailed variance analysis, I encourage you to refer to the financial statements and accompanying documents that were released today, and for sure you have the IR team to help you.
Let me now finish with an update on the progress of our strategic objectives and some guidance for the second half of the year. Starting with our efficiency and synergy program, we remain on track to achieve our accelerated target of EUR 2.1 billion of annual cash savings by the end of the year. 90% of the expected 2020 synergies post the Talisman acquisition has already been delivered. At the corporate center, we are on track to reduce costs to pre-acquisition levels. Other areas where material progress had been made include reductions in the cost of external services, upstream development, and personnel expenses. Overall, in the first six months of 2017, projects have delivered 50% of the annual target from a combination of new initiatives and projects already implemented last year.
Capital expenditure was lower than guidance in the first six months, We expect a higher level of investment in the second part of the year, putting our total capital figure between EUR 3.2 billion and EUR 3.4 billion for the year. This reduction has been principally driven by lower development costs rather than delays or project phasing. We expect upstream production to stay around our 680,000 barrels a day guidance for the year, with potential to go above this level depending on the performance of Libya. Our lower capital guidance allow us to maintain production whilst supporting the ongoing development of future projects. In fact, the current upstream portfolio of projects on production and in development, including the recently sanctioned Red Emperor and Buckskin projects, are capable of maintaining a plateau at around 700,000 barrels a day through 2022.
Future major projects identified Not yet sanctioned have the potential to stem this plateau or raise overall production volumes. For the remainder of the year, we expect the startup of Juniper in Trinidad and Tobago in the third quarter, of Kinabalu in Malaysia sometime in the fourth quarter, We are working towards achieving first gas from Sagari in Peru and Reggane in Algeria by the end of 2017 or early next year. In refining for the full year, we expect to achieve a margin indicator in line with our $6.40 strategic assumption. With all major planned maintenance in our refineries now completed, we will recover our ability to generate a premium to the indicator in the second half of the year. As a result, we remain confident in our EUR 1 billion EBIT target for the year, supported by higher utilization as already experienced in July.
In chemicals during the second half of 2017, we expect to continue benefiting from improved cost and energy efficiency, with strong margins supported by solid demand growth, although probably below the record levels of the second quarter. At the consolidated group level, we are forecasting a net debt figure below EUR 7 billion by the end of the year. This in line with our objective of obtaining a stable BBB credit rating from each of the rating agencies and reflects the resiliency of our overall business in the face of low and volatile commodity prices. In conclusion, and with six months of 2017 behind us, Repsol remains on track to deliver or improve on its commitments for the year. Our upstream division is continuing to focus on cost efficiency, project management, and portfolio optimization.
The division is on track to deliver average production of 680,000 barrels a day and may be even able to go higher depending on the performance of Libya in the second half of the year. Capital investments continues to be optimized, not at the expense of volumes or reserve replacements. In the downstream, the completion of planned refinery maintenance will free the division to improve utilization and conversion factors, allowing us to generate a significant premium to the margin indicator in the second half of the year. The chemical business is forecast to continue delivering in line with previous quarter, the commercial businesses will be as dependable as in prior periods. As I said, at the end of this first quarter, Repsol remains committed to securing a credit rating at BBB stable and lowering the group's free cash flow breakeven to $40 per barrel.
The company has made material progress in the first half of the year towards completing the deleveraging of its balance sheet, as recognized by Standard & Poor's this week when they raised Repsol's outlook to positive. Our focus on efficiencies and synergies, the completion of our refinery maintenance for the year, and the on-time, on-budget progress of our upstream projects are all contributing to our confidence with respect to the delivery of full-year targets. With that, I will now hand the call back to Paul Ferneyhough, who will lead us through a question-and-answer session. Thank you.
Thank you very much, Miguel. To everyone on the line, in case you run into technical problems during the webcast or conference call, please address any problems to our email address, investorrelations@repsol.com, we will contact you immediately to try to solve it. Before moving to the question-and-answer session, I'll ask the operator to remind us of the instructions for placing a question. Operator, please go ahead.
Thank you. To ask a question, please press star one on your telephone keypad. Again, please press star one.
Thank you. Our first question comes from Oswald Clint at Bernstein. Oswald, please go ahead.
Thank you, Paul. Miguel, hi. I just wanted to follow on Libya, since you mentioned it quite a few times, that your 23,000 barrels a day in Q2 giving you a nice EUR 50 million earnings swing year-over-year, I see within reports, 30 today. Can you just remind us what that net number could go to if things normalize in Libya? Obviously, there's been a lot of more discussions recently in France. What signals are you looking for in order to talk about higher Libyan production levels? Maybe secondly, also linked to OPEC, there's also a lot of discussion about reduced exports in the second half of the year. Clearly implications for your light heavy spread. How are you thinking about that as it feeds into your second half refining margin? Thank you.
Oswald, thanks for your question. In relation with Libya, my first comment is that really things are improving. Difficult to predict, though, what is going to happen in the following months because the situation is still unstable. Having said so, if things continue in a normal way, I may say that we will probably would be around top production, around 39,000 barrels a day by the year-end. With this assumption, to give you some figures, it will imply that for the full year, would be around EUR 450 million EBIT level and approximately one-third of that at the after-tax level. I cannot answer you about the reduction in exports or OPEC. I see it's linked to refining. Well, I think that we have seen in this quarter, how the margins between or the prices between heavy and light shrink.
This is also generating a counteract by the refiners. We really don't see it's so juicy now to use the heavy stuff. At the end, my opinion, probably wrong though, is that I think that we have reached the limit of narrowing this margin between heavy and light, and probably we'll see higher spread in the second half of the year.
Okay. Thank you.
Thank you, Oswald.
Thank you, Oswald. Our next question comes from Flora Trindade at BPI. Flora, please go ahead.
Yes, hello. Good morning. Thank you for taking my questions. The first one is on your CapEx guidance. Can you give us an idea of how much exploration CapEx you are including here? Considering that you said that this is not at the expense of production and that the current portfolio could give you the 700,000 barrels a day, could we assume that this level of CapEx could be the one going forward? What could be the level of CapEx going forward for a stable production level? A second question on the drivers behind the net debt target for the year. If you could give us what is behind in terms of working capital for the whole year. I assume you are maintaining the EUR 6.2 billion EBITDA reference you had given in past conference calls. Thank you very much.
Thank you, Flora. CapEx guidance for exploration is included in CapEx for sure, and it would be at the year-end around EUR 650 million. In relation with the CapEx to maintain production, I may say that for the whole group, I'm including here downstream as well, the figure of EUR 3.3 billion-EUR 3.5 billion is an area in which we'll feel comfortable to really maintain this level of 700,000 barrels a day of production. In relation with the working capital, I think that this year, the working capital, it's around where it should be. Remember that in the first quarter, we have the issue of the maintenance of all the refineries and also some cargoes to the refineries were advanced. I would say this is a more a normal working capital for the full year. I do not expect increases in this figure till the end of the year.
With one question mark on it, which is taxes. The Spanish treasury orders from last year, EUR 600 million. Normally we get paid this between December and January. Depending on that factor, the whole thing could change a little. For sure, the working capital is also pending on the prices. I would say if things remain normally, this should be the working capital figure with the question mark about taxes that the treasury owes us. In relation with the EBITDA guidance, I think that the second half would be a little better. I expect something between EUR 6.5 billion and EUR 6.7 billion for the full year. Did I answer you, Flora?
Yes. Perfect. Thank you.
Thank you, Flora. Our next question comes from Lydia Rainforth at Barclays. Lydia, please go ahead.
Thanks, Paul, good afternoon, Miguel. Two questions if I could. The first one just in terms of capital allocation, given the progress being made on the debt side, that the EBITDA ratios look better towards the end of the year, at what point do you look at either stopping the scrip or looking to buy back shares to offset the issuance there? The second one, just quickly on refining margins. Are you actually able to say what the premium has been so far, either this quarter or since Cartagena came back on stream? Thank you.
Thank you, Lydia. I think that the answer to the first one, it's similar to the one I gave last quarter. A, we have to guarantee the triple B stable. I think it's the place in which the company should be. For sure, in relation with the dividend, it's on the board decision to propose to the general assembly. I can say that at least my idea is really to aim into abandon the scrip once we have guaranteed the triple B stable. Other than that, once the scrip is over, the next step of buybacks would be absolutely depending on the investments proposals or the investments capabilities we may found in different projects for the future. In relation with the premium, I may say that in normal conditions, we should be around EUR 0.60 for the full year.
Between EUR 0.50 and EUR 0.70, probably depending, around EUR 0.60 per year. In this Q, it was zero. I would say in a normal quarter, we should be close to EUR 1.
Great. Thank you very much.
Thank you, Lydia. Our next question comes from Theepan Jothilingam at Exane. Theepan, please go ahead.
Hi. Thanks, Paul. Good afternoon, Miguel. I had one question just on chemicals. I think you described it as outstanding profitability, and you talked about the outlook for H2. I just wanted to understand, could you compare where the chemical business sits today on an underlying basis versus three years ago? How much self-help is there that's been incorporated into that business? The second question just comes back to the recent sanction of Buckskin. I just wanted to get your thoughts in terms of where you saw the economics and break even for that project and sort of the net spend for Repsol on that basis. Thank you.
Thank you, Theepan. I may say that we have improved, in comparison with three, four years ago, approximately in EUR 700 million at EBIT level. From those, we have all the efficiency and all the internal projects in which we have been improving our capabilities there. Also, we have the advantage of, versus four years, of a different price on the feedstock. I may say that one-third has been efficiencies and two-thirds refer to the market. Basically, the improvement, not only in the naphtha price but also in the dual feedstock that we have achieved for our system with LPGs on naphtha being used alternatively. I would say two-thirds for the market, one-third, which implies that if we turn back to the lower part of the cycle, instead of being zero or a little below zero, would be around EUR 200 million EBIT. This in relation with chemicals.
In relation with Buckskin, the figure of the break-even point we have there, it's a little below $50, so it's around $48. We are optimistic and let's see how it evolves. It's going to take some time, and our estimate for Buckskin is that first oil, if all things go well, would be around 2020. In relation with our CapEx, we are estimating approximately $240 million for our stake in the project. Did I answer you, Biraj?
Yeah, that's perfect. That's included in your thinking around that EUR 3.5 billion of CapEx?
Absolutely.
Okay.
The only things we are not including, for all of you to have a clear trend in the EUR 3.5 billion or a little more, but around this figure, are the 5, what we call the ACVs, or the big ones. Alaska, the Duvernay, Akacias, Campos 33, and Sagari. Other than that, with the EUR 3.5 billion, we can remain producing 700,000 till 2022.
Okay. Thank you, Miguel.
Thank you, Theepan. Our next question comes from Filipe Rosa at Haitong. Filipe, please go ahead.
Hi. Good afternoon, everyone. Two questions from me. The first one on the production outlook for 2018. I know it might be a little bit early, you are ramping up a few projects in the back half of this year. You have some projects that will continue to ramp up next year. Assuming, or if you want, excluding Libya or with Libya, what could be the outlook for production? It seems that we should expect something clearly above the level that you are budgeting for this year. That's the first one. The second one, just a clarification regarding your net debt guidance. Do you still assume, I believe that it's around EUR 600 million in asset divestments in your net debt guidance. Are you still assuming that, or are you now assuming a different number in that net debt number? Thank you very much.
Sorry. In relation with production outlook for 2018, I don't even know which is going to be our final figure for 2017. To give you at least some color, I think we are going to be above 700,000, not by much, above that figure, including Libya. In relation with the net debt guidance, the EUR 600 million, I actually put a figure in between. Basically, if we recover the EUR 600 by the year-end, we'll probably be closer to EUR 6.4 billion, if we do not, we'll probably be closer to EUR 6.9 billion. More or less, this is what my estimates give me today. Okay?
Thank you very much, Miguel.
Have a good vacation, Filipe.
Thank you. You too.
Thank you, Filipe. Our next question comes from Irene Himona at Société Générale
Thank you, Paul. Good afternoon. I just had a couple of questions, please. First of all, Venezuela. If you could possibly remind us of what is your exposure. What is at risk for Repsol, either in terms of balance sheet or other? Because clearly there is a deterioration there. Secondly, looking at the geographical split of your upstream adjusted net income, clearly North America remains loss-making. I just wanted to ask what is the gas price and oil price break even for that business, please? Thank you.
Well, thanks for the questions. In relation with Venezuela exposure, our total capital employed there is EUR 2.4 billion. Having said so, I think that somehow the focus is to limit that exposure around that level. Thanks to the actions we took, financially talking, we have been able to maintain this level in the first half of the year. I agree with you, the situation is critical there, and let's hope for the best, especially for the Venezuelan people. In relation with the geographical upstream in North America, I would say that the gas price break even in Marcellus is around $2.3, $2.4 all in. The other area in which we really produce gas, it's the Duvernay. In the Duvernay, the figure is a little higher than that, but it should be around $2.8, $2.9.
Basically, it's not the gas, the one that is generating our losses there. It's more related to Eagle Ford and Mid-Continent than any other place. Gas break even, I would say that for the gas production, we are close today, and it's the other assets, the one that are generating somehow difficulties. In Greater Edson, in which we have partially gas production, the break-even point for the gas, taking into account the $50 for the oil, would be around $2.7.
Okay. Thank you very much, Miguel.
Thank you. No, thank you, Irene.
Thank you, Irene. Our next question comes from Anish Kapadia at TPH. Anish, please go ahead.
Hi. Good afternoon. Couple of questions, please. Just firstly on the downstream, you've made a few disposals over the last couple of years in the downstream. The level of sell-down seems to have slowed down. I was just wondering what is there that was remaining in the downstream that you see as potentially non-core. What further disposals could we potentially see in the next year or two? The second one is switching to the U.S. In your Northeast gas position in the U.S., I think the capital allocation there is obviously quite gas price sensitive. I think you've talked about potentially hedging some of your gas price exposure in the Northeast. Can you talk a bit more about your current strategy with regards to your current rig count, what you'd expect to do in various gas price scenarios, and where you are in terms of hedging?
Thank you.
Thank you. In relation with the disposal at the downstream level, I would say that right now we are not looking about any asset or company to be sold. I think that we are okay where we are, so there's not much remaining that we want to dispose. Having said so, if someone is really to overpay it and give us a non-solicited offer, for sure we will be absolutely open. In relation with the second one, basically, in general terms, we like not to cover our position. This year is true, we did some little hedging in Canada, taking as a proxy the Henry Hub for the Canadian prices, but it has been little. Basically, all in, I may say that globally, we do not hedge our production.
Thank you.
Thank you, Anish. Our next question comes from Thomas Adolff at Credit Suisse. Thomas, please go ahead.
Thanks, Paul. Miguel, how are you? I have two, maybe three questions. Firstly on refining. Obviously, 2Q, you suffered a bit from the Maya spread narrowing quite a bit. I wondered what your true flexibility is on feedstock choices. Presumably, the reason why you processed quite a bit of Maya still in the second quarter is because of term contracts. Linked to that, assuming that is the case for the second half of the year, I wondered what sort of a Maya spread do you assume in your budget. Secondly, is it fair to assume From where you stand, that you are a dollar earner. If that's the case, I wondered whether you ever considered setting the dividend in US dollar terms as opposed to euro.
Maybe finally, just thinking out loud longer term, as you think about developing the Duvernay, maybe with a slightly smaller stake than it is today. I wondered what the strategic rationale is in staying in Trinidad and Tobago, on the gas side. Thank you.
Thank you, Adolff. In relation with the first one, we have total flexibility. The only thing is that we use Maya because it is the one that really fits in our analysis. I may say that is not something we assume. We do not budget for the second half of the year. We think, as mentioned before, that the spreads between heavy and light crudes will open in the second half of the year. Basically, because if it keeps shrinking, there is no gain on using this type of crude, so the demand will decline. I would say, I hoped or I expect a little improvement on the Maya spread versus what we have. Having said so, the name of the game for our system is flexibility on the feedstock.
Depending on which is the slate that provide us a better result or better return, is the one we will use. In relation with the second one, dividend in U.S. terms. Well, you just gave me an idea, I will give it a thought. Initially, we have not thought of it, but I will give it a thought. I promise. Okay. Strategic rationale on Trinidad and Tobago. Well, it is an asset that provides free cash flow with the last two discoveries. Really, we can guarantee plateau for a long time. As mentioned before, we are happy, as I mentioned in downstream with this asset, which does not imply that if someone thinks that the asset is more valuable in their hands than in ours, we will be ready to listen. As of today, nobody has come close to us in relation with Trinidad and Tobago.
That is it. Part of the assets have to be operated by us. Some others, we simply join forces with operators, we think that BP, despite what some, I will say, last two years in which CapEx has been in my estimate, a little higher than at least what I expected, the results are showing up, we expect good results in the short term for Trinidad and Tobago.
Thank you.
Have also good vacations. I know that today and tomorrow you are quite busy, but probably the day after you will have the deserved holidays.
You too. Thank you.
Thank you.
Thank you, Thomas. Our next question comes from Christyan Malek at JPMorgan. Christyan, please go ahead.
Thanks, Paul. Hey, Miguel. Two questions. First, back on your capital framework. I want to be clear around the priority. I understand that you want to stabilize your rating, which you're effectively doing. Once you've consolidated that, what is that platform to do? To spend more money and develop your portfolio beyond 2020? Will you direct that to switching off scrip and buying back shares? I want to understand what's the priority beyond a BBB stable rating. The second question arose, you mentioned, sustaining CapEx around three and a half billion to maintain production. How do you risk Libya and Venezuela and other countries in the context of that?
I guess the question behind that is, do you have to spend more in the outer years from 2018 in order to build a production profile that gives you that cash break-even you're looking for at the $40 level?
Well, in relation with the first one, to stabilize the credit rating, is not something that we do for the sake of having a credit rating. By far it's more important that it implies, in our case, having a very lean and flexible company financially talking. Which is something we absolutely need for the future. It also helps for the internal discipline with the businesses to attach to what we are proposing this year, which is basically cost efficiency, synergies, CapEx reductions. I think that there are more things around the process of stabilizing credit ratings than just for the sake of having the rating. The second question, I really don't understand it quite well. Can you repeat it, please?
Yeah. Put simply, does your CapEx have to go up next year?
No. As mentioned before, I think that we can keep our investment figure for the whole group at EUR 3.5 billion to maintain production, and this till 2022. For sure, if instabilities in some countries, this figure can change. If disruptions in Libya turn back, or if something happen in Venezuela, for sure, I cannot guarantee the EUR 700. All things equal, with the EUR 3.5 billion for the whole company, we would be able to maintain our production.
Okay. Thank you very much.
You're welcome.
Thank you, Christyan. Our next question comes from Hamish Clegg of Bank of America. Hamish, please go ahead.
Good afternoon, guys. A couple of mine got answered already, but just one still left. After the two big turnarounds you've seen in downstream in both the first and second quarters, could you comment if there's going to be any increase in complexity in your downstream portfolio at all? I know the opportunity when these big units are shut in to add bits of kit that could add some earnings to your refining margin could be pretty attractive. Is that something that's possible? Thanks again.
Not at the present time. Basically, what we are aiming is to improve efficiency, energy savings, and basically improving what we have. We don't see any increase in our complexity or in our conversion in the system. Think that with efficiencies and the advantages we may obtain from digitalization of some of the processes, we'll be able to recapture even more margin than the one we are capturing today. The work for the refining people is really to improve what they have. Not to expect major investments in the refining complexity. Okay?
Okay, thanks. Just one other, if I'm allowed.
Yes, sure. Hamish, go ahead.
You've done a great job bringing CapEx down and saving lots of money and restructuring the business. There's an investment community who aren't particularly big fans of scrip dividends, and we all understand how necessary it's been to help you stabilize your credit rating. In the environment, if we fast-forward a year or so, and you feel comfortable with the level of free cash flow for the business, could you mention your priority? Would it be to buy back stock or to cut the scrip, or is this something we can see staying for a long time?
I think that the order would be, A, guarantee the BBB stable. This is, for us, a must. In order, I will say, then will come the elimination of the scrip dividend. I do not close the door. If at the end we do not have interesting investment opportunities, then the whole door would be open for buybacks. This is a fourth step, to say something. First, it's going to be the BBB stable. B would be turning out the scrip. Third, no possibilities of investments in the business. Finally, if all of these are in and we still have some extra, I wouldn't mind to buy back shares.
Brill. Thanks for that. Have a great summer holiday.
Thank you.
Take care.
Thank you, Hamish. Our next question comes from Michele Della Vigna at Goldman Sachs. Michele, please go ahead.
Thank you, Paul. Miguel, I wanted to ask you a question that actually has nothing to do with the quarter, but rather with some of the technological changes we're seeing in transportation. There is increased focus on electric vehicles from both policymakers and consumers. As a leader in oil product marketing, I was wondering how you're thinking about integrating longer-term charging stations within your fueling stations, and if you have set out anything in terms of budget and investments for it, or if perhaps you think it is too early.
Well, couple of things here. First, we already have, in the north of Spain, a network in which you can charge your vehicle. That, as a first comment. It's in the Basque Country. We will increase that probably thinking in the long term. Having said so, we don't expect the electric vehicle to have a really impact in our sales till 2030. First comment. Second comment, which I think that has not been mentioned, or at least I didn't see it. Think that only a 25% of our products goes into light vehicles. Refining have other factors. Think on heavy trucks, think of ships, think of airplanes, think of chemicals, think of bitumens. They're only a part that is linked to the light vehicle.
As mentioned, in the long term, we are going to be there, and no major CapEx is needed once you have the sites. In some way, I'll welcome the utility companies to start putting service stations, and once they invested. We have the best locations, and it's not going to be much expensive for us to really include that in all the network. As mentioned, we have a small area in the north of Spain, in which we already can charge our electric vehicles there. Okay, Michele?
Thank you very much.
You're welcome.
Thank you, Michele. Our next question comes from Giacomo Romeo at Macquarie. Giacomo, please go ahead.
Hello. Thanks for taking my questions. Most of them already answered. One very quick on chemicals. Saw that volumes are down for the second consecutive quarters. Obviously very good margins, just wondering what's the drivers for second quarter volumes being again down year-on-year, and whether you expect to see a recovery or even a growth year-on-year in the second part of the year.
Thank you. A, the fall was just a 2-point something%, it's not that significant. You have to think that we have a stoppage in our crackers in Cartagena. Well, sorry, in Tarragona. We have an impact there. I think that we are going to be at the year-end around the levels of 2016.
Yeah. Okay, perfect. Thanks.
Thank you.
Thank you, Giacomo. Our next question comes from Alastair Syme at Citigroup. Alastair, please go ahead.
Thanks, Paul. Hi, Miguel. Can I just ask on some of the assets that are not receiving a lot of capital? You mentioned the Eagle Ford and the MidCon. Is there really no M&A market for these assets or is it just the price differential is so wide versus your own expectations?
Well, I think that there's always market for any asset, but it's depending on prices, it results more or less attractive. Right now, despite the fact that it's true that after-tax levels, they are not generating profits. They are generating cash as of today. We are not active on any of these two assets into the M&A market as of today. Okay?
You wouldn't see it as more beneficial just to take the price on offer and reduce the leverage, improve the credit rating?
Well, I think that we have reached a point. If you remember in our strategic plan, October 15, we mentioned that we were going to divest something around EUR 6.2 billion till 2020. Right now, we have in the first 18 months or 20 months already, we have divested EUR 5.1 billion. If you look at the debt figure, we are reaching the level in which we may be at a given moment recognized by Standard & Poor's as a BBB. Really there's no need to strengthen the efforts on the M&A as of today, especially at this price level. It's true that there has been some improvement, especially linked to the bubble in the Permian. Even with that, we do prefer to remain where we are in both assets, both in Eagle Ford and in Mid-Continent as of today.
Great. Thank you, Miguel. Have a good summer.
You too.
Thank you, Alastair. Our next question comes from T ristan de Jerphanion at Kepler. Tristan, please go ahead.
Yes. Hi, good afternoon, everyone. I think most of my questions have been answered. Just maybe a quick one on Venezuela. You mentioned at Q4, I think it was EUR 600 million-EUR 660 million receivables. I wanted to know where that went, in addition to your comment on capital employed. Also how much of that is overdue, and whether you think we could fear maybe some write-downs going forward. Thank you.
Thanks for your question, Tristan. Basically, when we talk about receivables in Venezuela, we also have to talk about payables. My figure shows that the difference between receivables and payables at the year-end was EUR 259 million. At the end of this quarter, so half of the year, the differential has increased just in EUR 40 million. Right now, this differential is EUR 299 million. Basically, I may say that both in Cardón, the system we have agreed with the authorities to monetize our gas, and in Petroquiriquire with the escrow account, both systems are working. Not at a perfect level. I may say Quiriquire is doing quite well. In the case of Cardón, more or less we are recovering about high 50s, 57% of our billing. Also it's true that we are delaying also the payable.
All in, we are basically where we are six months ago.
Okay, perfect. Thank you very much.
Thank you, Tristan. Our next question comes from Jason Kenney at Santander. Jason, please go ahead.
Hi there. Thanks for the time and the presentation. On tax, can you just give me some guidance around the divisional tax rates and the overall corporate tax rate expected for the second half? Secondly, just noting a report on Vietnam and drilling in the South China Sea near the Spratly Islands. I think the report mentioned a EUR 300 million development commitment so far by Repsol Talisman. Obviously, a lot of dispute there as to whether you'll see anything for that input so far. Any comments around that would be great.
Yeah. The tax for the whole group at the year-end would be around 35%, the spread between divisions would be 25% for the downstream division and around 50%-52% for the upstream division. On average, with our estimates for the full year, would be around 35% for the whole group. In relation with the Vietnam drilling, first, the figure is not the 300. We have already spent EUR 27 million in the exploration. We are working with PetroVietnam and with the Vietnamese authorities. The only comment is that right now, operations have been suspended, and we will have to see what the output is. As mentioned, EUR 27 million is what we have spent till now in this well.
That's it.
Any other.
Yeah. Fantastic. Thanks.
Thank you. Bye.
Thank you, Jason. Our next question comes from Marc Kofler at Jefferies. Marc, please go ahead.
Thanks very much for the presentation, afternoon, everyone. Miguel, I just wanted to come back to your words around capital spending for the rest of this year. Then I guess 2018 and beyond. Are you able to talk about the flexibility within the budget? I suppose really I was thinking, is there any, or is there more downside risk to some of the numbers that you're talking about today? Thank you.
In this year figure, we practically do not have any flexibility. Commitments are already there, not much room. The only deduction that we have been able to negotiate versus the initial budget, most of it has been improvements in efficiency in CapEx. The EUR 3.2 million, EUR 3.3 million for the whole group at the year-end is where we are going to be. Okay, Marc?
Great. Thank you.
You're welcome.
Thank you, Marc. Our next question comes from Sonia Ruiz at GVC. Sonia, please go ahead.
Thank you very much, Paul. Two quick follow-up questions. The first one is regarding dividends, because we talked about the possible elimination of the scrip dividend once the BBB and the stable outlook is achieved. I just wanted to ask Miguel if this comes also with the consideration of a possible change in the quantity of the dividend, because obviously, if we consider the current number of shares and we multiply by EUR 0.80, the amount of cash going out of the company in dividends is increasingly very high compared to the current levels. The second question is a clarification on the taxation that we talked before. You mentioned, if I am correct, that the upstream business could register between 50%-52% tax.
I suppose you are considering a high increase in taxation in the second half of the year for this business, because currently it's around the 36%, 35%. Just to see if I understand well the tax issue. Thank you very much, Miguel, and nice holidays.
Thanks, Sonia. Well, in relation with the dividend, I would like to enhance that at the end, the decision would be in the board. I don't want all of you to claim me once we reach the BBB stable, then the board says, "Well, still is not the time." At least my perception and my opinion is that I'll put that on the table. In relation with the quantity, well, right now what we pretend is to be in the first quartile, both in the oil sector with our peers in oil, and also being in the first quartile in the IBEX 35. This is more or less where we want to be in relation with the quantity. With the tax rate, on there you have to consider that in the first half, there has been some extraordinary items that were not taxable.
That's the reason why the figure for the first quarter looks lower. Basically, some of those one-off items have been optimization, or if you want, synergies with former Talisman. We are not considering it in the figures we provide you about the EUR 2.1 billion of efficiencies and synergies because it's one-off. We have been able to obtain some synergy tax talking in some countries linking former Talisman companies with former Repsol companies in order to maximize our fiscal terms. That's the reason why you have that difference. For the full year, our estimate today for the whole company is 35%, and it's 25% for the downstream and around 50%, a little higher in the upstream division. Is that clear, Sonia?
Yes. Thank you very much, Miguel.
Thank you.
Thank you, Sonia. That brings to a close our question and answer session. I would like to close this conference call and wish all of you a happy and restful summer break. Thank you.
Thank you. That will conclude today's conference call. Thank you for participation, ladies and gentlemen. You may now disconnect.