Conference is being recorded. Today's conference will be conducted by Mr. Miguel Martinez, CFO. A brief introduction will be given by Mr. Paul Furniho, Head of Investor Relations.
I would now like to hand the call over to Mr. Furniho. Sir, you may begin.
Thank you, operator. Good afternoon. This is Paul Fourniho, 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 Q1 results. This conference call and associated webcast will be delivered by Miguel Martinez, 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 Martinez.
Thank you, Paul, and thank you to those online for attending this conference call on our Q1 results. In today's call, I would like to cover 3 principal topics. Firstly, I'll summarize key messages and the main operational results secondly, the financial results of the quarter and finally, an update on our progress towards key strategic objectives. Starting with the key messages. At the macro level, the 1st few months of 2017 have seen a volatile and sustained improvement in our market environment, building on the recovery experienced in the second half of last year.
Under this scenario, Repsol has continued delivering on objectives and accelerating gains from efficiencies and synergies. Based on first quarter results and with commodity price continuing to fluctuate, our overall guidance on targets for the year remains unchanged at the present time. The Q1 has been strong in terms of EBITDA generation across all division, and net debt has remained broadly in line with our December close, with a small increase as a result of a build on working capital. In the Absinthe division, volumes were ahead of plan, thanks mainly to higher than budgeted production in Libya. And our exploration program delivered 1 of Repsol's most important discoveries of recent years in Alaska.
The Downstream division demonstrate its strength with the refining business performing in line with expectations and the chemicals and commercial business turning out another solid quarter. Even though a scheduled refinery maintenance limit our ability to generate a premium, the average refining indicator across the period demonstrated the strength of the underlying business. Let me now go into the main operational highlights from the quarter. Starting with the upstream division, production averaged 693,000 barrels of oil equivalent per day, a 2% increase quarter on quarter and a 3% lower compared to the same period in 2016. Production volumes were positively impacted by the return of Libyan barrels, adding an average of 20,000 net barrels per day in the quarter.
Additionally, the normalization of volumes produced in the UK North Sea post maintenance in the Q4 plus a full quarter contribution from Lapa more than compensated for the decline and the disposals of Tangu and TSP, which closed in December. A total of 2 exploratory and 2 appraisals wells were completed in the quarter. 2 wells drilled in Alaska were declared positive, significantly increasing expected recoverable reserves from the existing Pikka discovery. The remaining wells and an additional well completed after quarter end were written off with limited impact on results. Our exploration program for the year includes the completion of 15 exploratory wells and 2 more appraisal wells.
The Horseshoe wells drilled during the winter campaign in Alaska's North Slope extended our Pikka discovery and confirm the potential of the Nano Ship Formation. The contingent resources are currently estimated to amount approximately 1,200,000,000 barrels of recoverable light oil from our acreage, of which Repsol share is approximately a 40%. A price at work planned for next winter will allow us to further define the discovery and to progress the development plan. In the U. K.
North Sea, production at Flindra start late in March and the start up of Monarch is due in the 2nd quarter. For the second half of the year, we are expecting the Kinabalu redevelopment in Malaysia and the Juniper project in Trinidad and Tobago to commence production. Finally, in Algeria and Peru, work continues toward achieving fresh gas from Regan and Sagari before year end. Staying with developments, we have recently approved the FID of the Red Emperor project in Vietnam. Following receipt of state approval and expect first production late in 2019.
Turning now to the Downstream division. In refining, the main drivers of the business remained strong during the quarter, with the margin indicator averaging $10.10 supported by the strength of middle distillate spreads, heavy life crude and fuel oil differentials. This compares to an indicator of $7.20 in the previous quarter and $6.30 in the saving period in 2016. Scheduled maintenance in Bilbao and Coruna impacted distillation and conversion utilization, while reducing the flexibility of our system to generate a premium to the indicator. Planned maintenance in Cartagena starting this week will only partially impact our ability to deliver premium above the indicator during this second quarter.
Our budget for 2017 anticipates the impact of maintenance activities in the refineries, and our guidance fully reflects this. The chemical business continued its strong performance, generating an EBIT contribution in line with Q4 of 2016. The increase in the price of naphtha was offset by increasing international prices that are supported by firm global demand. In the commercial business, marketed benefited from a strong continued strong retail environment in Spain with demand growing modestly year on year. Moving now on the financial results, I'll briefly summarize the principal outcomes of the quarter.
1st quarter 2017 CCS adjusted net income was €630,000,000 €58,000,000 higher than the Q1 of 2016. The EBITDA at CCS stood at €1,700,000,000 which compares with the €1,200,000,000 generated in the same period of last year. Net income was €689,000,000 €255,000,000 higher than in the Q1 of 2016, due to the higher adjusted results in 2017 and the negative inventory effect registered last year as a result of the decline in prices. In the upstream, adjusted net income in the quarter was €224,000,000 207,000,000 higher than the same period in 2016, principally due to higher realized prices, the resumption in Libya and lower costs. In the Downstream, CCS adjusted net income in the quarter was €500,000,000 €56,000,000 lower than in the Q1 of 2016.
Finally, in Corporate and Others, adjusted net income in the quarter was €93,000,000 lower, mostly due to the reduced stake in Gasnat and gains recognized in Q1 of 2016 from the repurchase of Talisman Bonds, partially offset by lower costs in the corporate center. Let me now finish with an update on the progress of our strategic objectives in the quarter and the outlook for the rest of the year. Starting with our efficiency and synergy program, good progress was made towards our accelerated target of €2,100,000,000 of annual cash savings by the end of this year. In the Q1, projects have already delivered more than €500,000,000 from a million from a combination of new initiatives and projects implemented last year. With regard to CapEx, we continue to optimize our balance sheet with a selective approach to new upstream developments, as well as supporting the performance of our key projects.
We expect our absence investment intensity to pick up in the remainder of the year and CapEx guidance for 2017 for the whole company remains unchanged at around 3 point €6,000,000,000 of which €2,700,000,000 refers to the upstream division. Whilst average was ahead of plan in the Q1, we remain cautious given the uncertainties in Libya. Although I'm pleased to report that recent interruptions have been resolved. For 2017, we are maintaining our guidance of around 680,000 barrels of oil equivalent per day. Looking forward, current assets ramping up or due to start up in the near future along with FIDs this year will allow us to maintain our reference production level of 700,000 barrels a day past 2020.
Whilst continuing to focus the portfolio on delivering higher margin barrels. We currently have 5 major projects progressing towards FID in the coming years. Selectively facing these projects will allow us to sustain or even increase production through 2025 if commodity prices are supported. In the Downstream, our integrated business continues to deliver strong results quarter on quarter. In refining, we are focused on improving cost and energy efficiency and leveraging flexibility in our feedstock product mix.
The margin indicator averaged $7.20 in April and the businesses have regained the ability to generate a premium. The remaining major plant turnaround at Cartagena is only expected to have a partial impact on premium in the second quarter. In chemicals, we expect our business to continue to benefit from the cost and energy efficiency projects already initiated, supported by solid demand, favorable margins from higher value products and our enhanced feedstock flexibility. Our commercial business continued to prove effective with every quarter delivering stable results whilst we prepare for the challenges for the next decade. Turning to our credit rating.
During the quarter, we had positive discussions with the rating agencies, and S and P improved their outlook on our rating to stable. Net debt was a little higher at the end of the quarter, reflecting a build in working capital. Operating cash flow pre working capital more than cover investments, dividends and interest payments. There were only minor proceeds from divestments received in the quarter. We maintain our long term guidance on targeting cash neutrality of close to $40 Brent on an annual basis and expect to achieve a net debt to EBITDA ratio of around 1.1 to 1.2 times by year end, underlining our commitment to stabilize our investment rate rating at BBB.
In conclusion, the Q1 of 2017 has been characterized by an improving macroeconomic environment overlaid on a hard to predict geopolitical background. In light of this, Repsol continues to focus on delivering a strategic plan that is built on a foundation of value and resiliency. Our upstream division is focused on reducing expenditure, optimizing investments and deleveraging and delivering new projects on time and within budget, as well as actively managing the asset portfolio to lower overall production costs. In the Downstream, our focus on maximizing our integrated margin across the whole value chain is proving to be effective and continues to generate significant levels of free cash flow. We are committed to confirm our credit rating at BBB stable and lowering the group's free cash flow breakeven to around $40 per barrel.
Now is the time to stay committed to our strategic goals and work our assets to deliver on our guidance for 2017. With that, I will now hand the call back to Paul, who will lead us through a question and answer session. Thank you.
Thank you, Miguel. In case anybody on the call runs into technical problems during the webcast or conference call, please address any problems to our e mail address investorrelationsrepsol.com and we will contact you immediately to resolve the problem. Now let's move on to the Q and A. Operator, please can you lead us through the instructions for placing a question?
Thank you,
sir.
Thank you, operator. Our first question comes from Lydia Rainforth at Barclays. Lydia, please go ahead.
Thanks, Paul, and good afternoon. Two questions, if I could. Well, the first one was just on the working capital move for this quarter and how you might what was the cause of that and how you see that playing out for the rest of the year? And then secondly, could I just ask you to discuss the situation in Venezuela a little bit more in terms of what you're seeing? And within that annual budget that you have for this year, what the contribution of Venezuela is within that both on the CapEx side and the cash flow side?
Thank you.
Thanks, Lydia. Well, these were two questions that I don't expect. In relation with the working capital, I mean, it's clear that the almost €800,000,000 €780,000,000 above what we had at the year end, it's a mix of many things. First, I would say that the maintenance works that we have been suffering during the quarter in Coruna, Bilbao and the preparation for the maintenance in Cartagena somehow messed up all the inventories in one hand. In the other there during the month of last December, there were a number of cargoes, crude cargoes that were higher than those in March.
And as we paid in 30 days, this has implied also an increase in the working capital. Another factor has been that the CapEx has been lower than it was in the 4th quarter, And this also has reduced somehow the accounts payable figure. So all in, I think that the situation well, a final factor is that there are some operators and dealers that get their annual payment raffles and commissions at the end of the year. So the whole thing has combined to ended up in this situation. To your question for the rest of the year, I think this is a one off and basically at the worst we will ended up with this growth in the working capital at the year end.
So this in relation with the working capital. And in relation with Venezuela, we have been able that both the agreement regarding Petroquiriquir and Cardon are working and the net that we have because between account receivables and account payables have improved by €30,000,000 So right now, the whole thing is working and we hope it will continue in the short term. Did I answer you, Lydia?
Yes, that's perfect. Thank you very much.
Thanks for your question. Thanks, Lydia. Our next question comes from Brendan Warne at BMO. Brendan, please go ahead.
Yes. Thanks, gentlemen. It's Brendan Warren from BMO. I guess, you touched on your progressing 5 major projects or phasing of 5 projects towards delivery by 2025. Can you just give us an update on those?
And I'm guessing they're the ACDC plus 1. Just particularly with the Duvernay, just what still needs to be done to reduce breakevens? And what sort of levels of breakevens are you targeting?
Thanks, Brendan. Well, I mean, the 5 projects, I remember that in the last call, we mentioned 4 of them, but the 5th one is Sagittario in Brazil, which is a big project, which is now pending on the development program by Petrobras. In relation with the others, I would say, starting with the Duvernay, I think it's way too early to establish a breakeven point. Our estimate for the Duvernay is that probably will the development there would be modular, but it will take longer. So basically, it's somehow the future and we expect to reduce somehow the derisk the area with the works of other companies.
Think there that data about wells are communicated in Canada within 90 days and they become public. Basically, what I can tell you right now is that it's liquid rich. The sweet spots breakeven are really low. And I'll say more than that, it's more than 300,000 acres what we have there. So our acreage there is massive.
And the idea once we and third parties derisk the area probably would be to join forces with a third party. But right now, it's quite difficult to assess any breakeven point.
Okay. Thanks, Miguel.
You're welcome, Brennan.
Thank you, Brendan. Our next question comes from Flora Trindade at BPI. Flora, please go ahead.
Yes, hello. Good morning. First question is a clarification on what you mentioned in working capital deterioration. So if I understood correctly, you're saying that for the remainder of the year, there shouldn't be any buildup, but it will be difficult to recover the deterioration witnessed in Q1. Just trying to cross check that.
And then a second question on the premium over the refining indicator, which you mentioned there was no premium in this quarter. For the full year and considering the $0.6 per barrel premium you had last year, should we assume a much lower level this year? Or do you expect to recover in the second half? Thank you.
Well, in relation with the first one, yes, I do not expect any buildup throughout the year. Only it could be affected if prices move really up, this will be by far more than compensated by the cash generation. So if conditions price stocking remains stable, yes, I don't expect any buildup on the working capital. And in relation with the second one, this quarter, first one, we have been basically $0.20 below the index due to the lack expect at least to be between $0.30 $0.50 above the index and for the full year would be over $0.70 above the index. Think that if the year would have developed without the needed maintenance, we can reach 1 extra dollar in regular conditions.
Having so to put it in other words, in a like for like basis, the refining margin would be backloaded in the second half of the year. Is that right, Flora?
Thank you. Perfect. Thanks.
Thank you, Flora. Our next question comes from Thomas Adolff of Credit Suisse. Thomas, please go ahead.
Thanks, Paul. Hi, Miguel. Two questions, please. Just wanted to go back to Saggitario. It's a discovery that we haven't discussed for a number of years.
And it's interesting that it has reemerged and according to you in Petrobras Development Plan. So perhaps can you give a bit more color on how we should think about Saggitario? Is it a standalone development? What sort of a size FPSO development, how big is actually to the field? Some detail would be very helpful.
The second question I have is, when I asked you this question at any time over the past 3 years, what keeps you up at night? I think you had a very, very long list. It felt like you're working in an emergency room. But if we look at Repsol today, it feels like the emergency room moved to a nicer part of Madrid. So really my question is what keeps you still going?
That's a personal question, Miguel.
Well, in relation with Sagittario, I mean, we own there a 20% working interest. The first data we have about size would be around 1,000,000,000 barrels of oil equivalent. And right now the program, I mean, if things goes in the right direction, it would be seismic processing in the 1st Q 2018 and probably an appraisal well in 2018 as well. So if things move smoothly, I think that FID would be taking around 2021, 2020 with first oil probably around 2025. So it's going to take a while, but it's a project in which I think that both Petrobras and ourselves are quite interested.
In relation with the Safecon 1, I don't know. I mean, what keeps me still going. It's true that this year is somehow a transition year, but challenges will always appear, especially in a world in which geopoliticals can change the game in hours, not to mention next Sunday. So I think that to keep improving the company and give the help I can to the rest of the team is what gives me going on. Okay.
Thank you. More or less, Thomas. Thank you.
Thank
you. Thank you, Thomas. Our next question comes from Felipe Rosa, Haitong. Felipe, please go ahead.
Hi, good morning, everyone. So coming back to the Venezuela theme, just to if could give us a better idea, for instance, last year in 2016, what was the EBIT contribution of Venezuela for us to have an idea what could be at risk if there is a material disruption in that country? And going back to Libya as well, if you could just give us an idea as well was the contribution of Libya in Q1? And how do you see this going over the next quarters? The stability continues, but apparently, you continue to be able to produce there.
So if you could follow-up on these two themes. Thank you very much, Miguel.
In relation with Libya, in this quarter, EBIT level, we did €80,000,000 and the after tax results were 26. And more or less that can give you some color taking into account that is 20,000 barrels what we have produced daily. If things goes right in Libya, we will expect to reach plateau by January next year, which I think it's possible. If things move smoothly there. Plateau, 340,000 barrels, which net for us implies 40,000.
In relation with Venezuela, operating income was €81,000,000 and adjusted net income was €45,000,000 in the Q1. This is more or less the color I can provide you regarding these two countries. And for sure, are the only ones as of today in which we have some concern.
Okay. Thank you very much, Miguel.
Thank you, Filipe.
Our next question comes from Jason Kenney at Santander. Jason, please go ahead.
Hi, there. Thanks for the time this morning. Can you talk about the potential for tax rebates and the contribution or support for cash flow from operations? I was wondering if there was a particular support in the Q1. And if not, if there's going to be support for from tax rebates in the 2nd or 3rd quarters, something that we are watching for?
Thanks, Jason. Yes, there is a one off in the Q1, EUR 56,000,000. There were a company, former Talisman, with losses that couldn't be recovered through a merger with the former Repsol Companies, we have been able to really gain €56,000,000 If you look at the rate, we are in the mid-30s in this quarter. And the main reason of this reduction is the €56,000,000 gain we had there. Other than that, I'll say there's nothing extraordinary or one offs in the whole account.
Okay. And maybe one follow-up. I was just wondering if you were still proactively looking at further divestments across your portfolio? And I don't know if you can comment specifically on North Africa potential sales?
Not at the present time. I mean basically the divestment program, if we look at the figures since we launched the strategic plan in October 2015 till the end of last year, we divested in my book €5,100,000,000 The total divestments for the 5 year plan till the end of 2020 was €6,200,000,000 So basically, the whole work has been done. And if you look at our ratios and the reactions of the rating agencies, we are absolutely aligned. Even this quarter, the ratio, debt to EBITDA, I mean, taking account that this just 1 quarter was around 1.1. So basically, we are not active at the divestment of any part of the portfolio right now.
Perfect. Thanks very much.
You, Jason. Our next question comes from Irene Himona at Societe Generale. Irene, please go ahead.
Thank you, Paul. Good afternoon, Miguel. My first question is on the financial results in the Q1, €155,000,000 I mean annualized, it's about 7.4% of your pro form a net debt. It appears a little bit on the high side. I wonder if you can give us any sort of comment, any guidance for that for the full year.
Secondly, you have made a number of disposals in the LPG business. Again, anything you can say regarding what is a sort of normalized annual EBIT level from that business given the smaller size would be very useful. Thank you.
I mean, the starting to the first one. I mean, I think that in a like for like, I mean, if prices are around what we have had in the Q1 and refining margins are also around, really to multiply by 4 could be correct. The only thing is that I don't know if prices are going to be in the same level as in the Q1 or refining margin. Supposedly, refining should do better in the second half of the year. So I'm quite positive if I look at the results we have obtained this quarter looking ahead.
In relation with the LPG, the disposals have had an impact for sure. Remember that 20% of the EBITDA was gained in the pipeline business that was sold last year. Also within the year, we I mean, the formula we have for the LPG, the battle LPG takes into account the prior 2 months. So to put an example, on March, we had the prime row price of the average between January February. But this is stopped by the government, so we can only increase a 5% every 2 months, which is when the prices are changing.
So I'll say that basically, right now, the government is due to us some money in relation what we have obtained in the Q1. In an annual basis, the EBIT at the LPG should be around €130,000,000 €140,000,000 for the full year.
Thank you very much.
You're welcome, Irene. Thank you, Irene. Our next question comes from Biraj Borkhataria from Canada. Biraj, please go ahead. We're going to move to the next question.
So the next question comes from Michele Della Vigna at Goldman Sachs. Michele, please go ahead.
Thank you for taking my questions and congratulations for getting the net debt to EBITDA down from 2.4 to 1.2 in just 1 year. I was wondering too, in your conversations with the credit agencies, is the current level of 1.2 times enough to warrant a credit upgrade? Or do you feel like you need to get down to 1 times? And then secondly, on the Pikka discovery in Alaska, you're going to do more appraisal in the coming winter. But how do you think about the development?
I believe you've got in mind the modular development. How would you think about structuring it from a CapEx and production standpoint? Thank you.
Thanks, Michele. In relation with the credit agencies, I remember that in one of the meetings, I mentioned that by the year end our ratio is between 1.1 or 1.2, we should merit the BBB is stable. Well, they said, yes, but it takes time. So I'll say that at that level, we would be in good shape and probably the recognition of this situation would be done by the agencies. But it always takes some times with the agencies to obtain upgrades.
In relation with Pikka, I think that right now is way too early. It's way too early because next year we have 2 extra appraisal wells and probably we'll know better after this. But a couple of things are clear. In the first analysis we had, the first phase of up to 120,000 barrels gross is what we are looking at it with the data we have today. Having said so, I have to say that the project is way too big and we wouldn't mind to partner with a 3rd party there.
But there's no much data or more color than I can provide you as of today.
Thank you.
You're welcome, Michele. Thank you, Michele. Our next question comes from Tipan Joffalingam at Exane. Tipan, please go ahead.
Yes. Hi. Good afternoon, gentlemen. Just a couple of questions. Firstly, just on the downstream.
I think you sort of outlined the conditions for April. I was just wondering how you saw the Downstream evolve in the second half this year. Any color there? And any strategy around hedging margins? The second question, just in terms of exploration, could you please perhaps highlight any high impact wells that you see for Q2, Q3 and the remainder of this year?
Thank you.
Thanks, Thipan. Well, if I only would know the evolution, I would make a lot of money. But being clear, we expect internally to improve the index. Talking about the index is quite difficult. What we see today is a real strong margins throughout Europe.
Even the hydro skimming refineries can be at full speed today. So all the factors makes me feel comfortable and optimistic. In relation with hedging, no, we do not hedge margins in refining. Looking out also at the second half, chemicals are looking really strong. So this is more or less the color I can provide as of today.
And in relation with the second the rest of the year, Q2 and Q3 in exploration, Trolley Colombia, both onshore and offshore are the most interesting short term, Along with the 2 Vietnamese exploration wells, we are going to drill that are in the area of Carondeau or Red Emperor. So I would say Vietnam and Colombia are the ones that I will bid for looking ahead.
Thank you.
Does that work
right, Thi Pan? Okay. Thank you, Thi Pan.
Thank you, Thi Pan. Our next question comes from Hamish Clegg at Bank of America. Hamish, please go ahead.
Thanks very much guys. Good afternoon. Just a quick clarification. The sort of the net debt creep was really just a seasonal change in working capital, if I'm right in thinking and expect that to reverse. Second question was just on the sort of implied group effective tax rate.
It seemed it was somewhat lower in the Q1, helping your net income. Do you mind giving us a little bit more color on that? And otherwise, yes, that's it for now.
Thank you. Think it's more than a seasonal change what we have suffered in this quarter. I think that the whole maintenance plus the number of cargoes that we bought in December plus the year end that always with operators and with dealers increase. So I would say partially seasonal, but partially is also due to the maintenance that we have been suffering in Coruna and Bilbao. And in relation with the effective tax rate, basically, it's low in this quarter, but the main reason is that the €56,000,000 we gain with the operation I mentioned before.
And other than that, you only have €20,000,000 but those change every quarter, which is the impact of foreign currencies like the real. When we have a devaluation of the real, our capacity to deduct in euro terms the depreciation of the investments we have there shrink somehow the our and increase our fiscal effective tax rate. During this quarter, to put the example of Brazil, we have obtained a revaluation of the real, which has implied 13 extra 1,000,000 of gains in the tax. So basically with these two effects, you ended up with the picture we expect. If I have to speak about the full year, for sure it's going to be dependent on oil prices, because those are I mean, the upstream area is the one that really is sensible to the tax rates.
My estimate for the year would be between 36% 38% for the full year for the whole company.
Okay. That's perfect. I had one tiny follow-up actually, which was the other question just on the tip of my tongue earlier, which was just regarding exploration. We've seen some mixed success in Guyana from the likes of Exxon and Apache. Exxon obviously extending at least a discovery with the success of their Chinook, I think Chinook is pronounced, discovery earlier in the quarter.
And Apache actually had a dry hole. Is your Suriname acreage is pretty close to that. Is there any read through to that? And is that position on your exploration sort of target list?
[SPEAKER JOSE RAFAEL FERNANDEZ:] Yes, you are right. We have 2 blocks nearby the discoveries from Exxon. But there is no well this year. Though at least the geologists are enthusiastic about the results of Exxon and probably next year we'll have something to say about Guyana. Okay?
Brilliant. Thanks, Miguel.
You're welcome. Thanks, Hamish. Our next question comes from Christian Malek at JPMorgan. Christian, please go ahead.
Hi. Thanks, Paul. Thanks for taking my question. Good afternoon. Just one question regarding your sort of medium term CapEx outlook and the extent of flexibility if oil prices remain under pressure, given the prevailing guidance for an increase in 2018 spend, I just want to understand to what extent what would be the sort of the percentage increase year on year that you're expecting?
And where is the flex in that, particularly given delivery of productions in mid- to longer term? Just want to understand
that. Thank you. I have to say that for this year, really the flexibility we have CapEx stocking, it's really small. I mean, basically, we think that the outlook for the whole company would be the €3,600,000,000 from those. Most of it will go to the Upstream division with €2,700,000,000 for the full year.
The impact of production if prices get there, I mean, we have at least from now till 2019 without touching the 5 big projects, I can mention that we have Flindra, which is start this quarter. Next quarter, we'll have more NARF. In Trinidad and Tobago, I think that in the Q2 of 2017, we have the onshore projection compression project that will help. In the Q3 also in Trinidad and Tobago, we hope Juniper to help increasing approximately 30,000 net barrels to Repsol. We have Kinabalu in the second half of this year, which will also increase production.
Regan by the year end as well as Sagari. Perla's second phase will come probably by 20 18, the phase of 600,000,000 standard cubic feet a day. Bungapangma also will increase I mean, will start execution and will start producing probably by the end second half of twenty eighteen. So even in this lowest scenario, we have ongoing projects, basically ramp ups, which doesn't imply a lot of capital to really increase production. So we feel quite comfortable with the 700,000 barrels figure for the following year without touching the 5 large projects.
Right. This is squaring so just a follow-up squaring that back out with your long term $40 FCF neutrality, what you're saying is if it's implicit that you think CapEx could stay broadly flat, slightly up as you've guided to without having to move it meaningfully higher?
Yes. We are going to remain flat if none of these projects goes ahead. And the main variance, I mean, the 3.6, 3.8 level is the one that guarantees the 700,000 bottles. On top of that, if the conditions are there and right now the hurdle is at $50 the project have to present a net present value 0. If these five projects come online, then this will be the basic increase from this 3.7 figure, which is what we think able us keep us in the 700,000 barrel level.
And would you care to quantify what that CapEx is, the uplift that you'd be expecting if you sanction those projects?
Well, this will come with a strategic plan that probably will be either reviewing or presenting next spring, but it's really quite difficult to quantify today these 5 projects, because each of them are in a different progress situation. So quite difficult to put a figure there on how any of them and which development would be the optimal to really go ahead with the project. So I'm sorry, but quite difficult to put a CapEx figure today in these five projects.
And sorry, just to come back to the long term goal of 40, just to be really clear. Assuming these projects are sanctioned, would that long term goal change by definition because you obviously got more burden on your CapEx?
Sorry, can you repeat the
Your long term goal for FCF neutrality, the $40 is that variable in the context of the rate of change on your projects and how you sanction those projects?
I mean, I'll say it's I mean, we are trying to reach an objective of being free cash neutral at $40 This is our main objective, somehow becoming producers in areas of low cost. For sure, if we go into these projects that probably have some of them higher breakeven, This will imply extra CapEx, but for sure if they don't cross the hurdle of the $50 net present value 0, we will not go ahead in the existing scenario. A different thing would be if we find ourselves in a price deck or a price scenario absolutely different from the one we are today. But it's quite difficult to say. I mean, I only can answer to the existing price scenario.
Thank you very much. It's very clear.
You're absolutely welcome. Thank you, Christian. Our next question comes from David Gamboa at Tudor, Pickering and Holt. David, please go ahead.
Thanks. Thanks, Miguel. I have two questions, please. First one on the refining side. So given the current global scenario, you've got OPEC cuts, declining production in LatAm, so kind of a shortage in heavy oil.
How do you see that, with the impact on the light heavy differentials having an effect on Repsol's refining profitability? I know you're expecting higher refining margins in the second half of this year. But I was just trying to understand how the light heavy differentials and its most recent behavior impacts your profitability in that business. And the second one is on Alaska again. So you mentioned Pika plus Horseshoe is around 1,200,000,000 barrels recoverable.
If I'm not mistaken, there were some large numbers out in the public domain when Pikka was initially discovered, I think around $1,400,000,000 I just wanted to clarify the size of the discovery, if you're able to share with us the split between the Pikka unit and the Horseshoe discovery in that 1,200,000,000 barrels. And if you're able to share, if I'm not wrong, this project is part of your ACDC project. So is a $50 per barrel breakeven also a fair estimate for this development? Thank you.
Well, the impact on light and heavy differentials really impact those that have a higher conversion, which is our case. Taking into figures, we have seen from last year a spread between Maya to put an example that has moved from $12 down to $9 $10 this year. So a small shrink in the spread has happened probably because the cut in OPEC was more in medium to heavy crudes than in other type of crudes. Having said so, we still see a strong demand and we still see what we have today, which is a margins. I think that if someone is in the existing situation making as index more than $7 per barrel, there's no reason to think that this is going to change.
So the impact, as mentioned, it has been between $2 $3 And in relation with Alaska, I cannot disclose you today the split. We prefer to keep it the way it is because there's much uncertainty in the positive side. And by that, I mean that we are not talking only about Nanushuk, which is what we have mentioned, but we also have other formations there like Alpine and some others. So the whole thing has to be better analyzed before we can give you some data that as of today would be probably wrong. So if I may, I do prefer not to split today.
Is that okay?
That's fine. Thank you very much. Any comments on the breakeven, if you can?
Well, as mentioned, it's way too early, but for sure the data we have before the last discovery where that probably or we had around €400,000,000 of oil in place recoverable. Right now, we have more than triple that. So figures may look really good, but the discovery was just a couple of months ago. And we still need more time and more appraisal. Think also that in the area, part of the reservoir, the acreage is on ConocoPhillips, and they would also be drilling probably next year.
So this will provide us for by far a better insight of what we have before of what we have today. Is that okay?
Yes. Thank you very much, Miguel.
You're welcome.
Thank you, David. Our next question comes from Giacomo Romeo of Macquarie. Giacomo, please go ahead.
Good afternoon. Thanks for taking my questions. Couple of questions for me. First one is, you talked about most of the projects in the ACDC group. So just wondering if you can provide some color on Campos 30 3 and on Acacias.
I think those are the 2 left. The other question I had actually was on Bakken. In the past, you've mentioned it as one of the projects for potential FID this year. Just wondering if there is anything changed there and if you can provide some more color?
Giacomo. In relation with Campus 33, I have to say that the appraisal campaign is completed and probably will go into the commerciality declaration in 2018. The feel is quite gassy. We are talking there fifty-fifty between oil and gas. And the estimated oil equivalent in place is around 1,400,000,000 barrels.
The development, as you can understand, is going to be much dependent on gas price. That would be a great help for the Brazilian society. And right now, Brazil is analyzing and trying to improve with this program, Go Brasil and Go Gas. And we expect shorter than later to really have a better idea on which the gas price may be. But as mentioned, we expect to take the declaration of commerciality by 2018.
In relation with Bakshin, the operator is a log and we are working with them in the formal FID. Right now, we are somehow in between the analysis of the engineering and all of those long lead Thank you. And just
Thank you. And just follow-up, can you provide some more color on our cash outs? Where do we stand there? What's is there anything you're planning to do this year?
Acacias in Colombia, it's heavy oil. And we are right now working basically with Ecopetrol to see which is the best way to move ahead. I think that Ecopetrol, it's I mean, we have good relation with them and probably FID could go ahead in the first half of next year. Perfect. Thank you.
You're welcome.
Thank you, Giacomo. Our next question comes from Tristan Jafanian at Kepler. Tristan, please go ahead.
Yes. Hi, good afternoon. Thank you for taking my question. First question is on Brazil. There has been press reports recently about a failure on a couple of flexible risers.
And it's my understanding that one of them was on BMS9 presumably a few months ago. So first, if you could confirm this And second, if confirmed, could you please give us some more colors on that? And second question, just to quickly come back on Chemicals. I know you're optimistic for the second half of twenty seventeen. If you could just provide a hard guidance in terms of EBIT for the year, that would be very helpful.
Many thanks.
In relation with the first one is the first new we have about we are not aware. So if something have happened in the riser may not be significant or maybe in someone else's field. We don't have any data about it. And in relation with chemicals, I would say that EBIT would move around 600,000,000 up to 700,000,000 €600,000,000 it's quite reachable. I would say €700,000,000 would be a good goal for the chemical business, a little below what we did last year, which was around EUR 700,000,000.
Euros Okay?
Okay. Thank you very much.
Thank you, Tristan. That was our final question and concludes our Q1 conference call. Thank you for joining the call today.