Earnings Call: Q3 2020

Oct 26, 2020

Good morning, ladies and gentlemen. Welcome to Galp's Third Quarter 2020 Results Call. I'll now pass the floor to Mr. Otello Ryivo, Head of Investor Relations. Good morning, ladies and gentlemen. Welcome to GALB's 3rd Quarter 2020 Results Conference Call. Today, GALB will provide Carlos will provide an overview of our operations as well as cover the recent developments, and Felipe will then take us through the quarterly results. At the end, we will be available to take your questions when Thor will join us as well. I would like to remind you that we may make several forward looking statements. Actual results may differ to the factors included on the cautionary statement available at the beginning of our presentation, which I advise you to read. Thank you. Carlos, the floor is yours. Thank you, Otello, and good morning to you all. I hope you and your families remain safe and healthy in these very challenging times. So I will start by covering the quarter and then address the events announced earlier this morning. I'm on Slide 4. So, after a challenging first half, we saw some signs of recovery during the 3rd Q. And more importantly, we saw Galp's operational resilience coming into play and driving a robust performance during this quarter, which was really challenging. Besides the operational performance, we are moving forward with our strategic guidelines back to our Capital Markets Day in 2020, so in February. So during September, we have completed the transaction related with the acquisition of the 2.9 Gigawatts of Solar PV Portfolio in Spain, an important milestone on the path to deliver our renewal strategy. The Q3 was also much cleaner in terms of one off impacts, which affected the sector during the very volatile first half of the year. So you see this quarter numbers that shows Galp's cash generation resilience even during these challenging times. The Q3 provided a much more robust cash flow from operations of around €390,000,000 actually it was €391,000,000 and almost €250,000,000 of free cash flow before the payment for the solar transaction. More importantly, in one of the most difficult years ever for this industry and consider or considering the relevant solar acquisition, Galp is almost free cash flow neutral in the 1st 9 months of 2020. So I think it is something to retain as one of the key messages. Moving now to the Slide number 5, and looking at the upstream performance. We have resumed the ramp up of our Brazilian projects. The unit allocated to 2P North reached plateau. This is a notable milestone, which represents the completion of the so called first development phase of 2P and Irizema fields. First oil for this project was just 10 years ago and we were able to deploy 9 units to produce which are now at plateau delivering in a 100% basis about 1,300,000 barrels of oil per day plus the associated gas, which is piped to the domestic market. Additionally, on BMS 11A that incorporates 3 fields, we resumed the ramp up process of the unit which is developing the Birbigao and Sururu fields having connected the force producer well in early October. In the meantime, the planned maintenance program has resumed with some activities being performed and other planned to happen this quarter. In terms of production guidance, we maintain at about 10% growth year on year. It is also important to highlight the efforts to optimize the development of 2P and Iracema and continuously assess value added opportunities for these giant fields. As I've mentioned, we have completed what we call the first development phase. Today, we have the experience and also the technical data, which indicates further potential to optimize and extract more value through a second development phase. We maintain and you should remember that the ambition of increasing the recovery factor to over 40% And the JV partners are already working towards such objective. Finally, during this period, the Santos Basin presales players agreed on a new integrated framework, which covered utilization of offshore gas pipelines and also the access to the onshore gas processing facilities. This will be supportive for our oil production and increases our gas monetization options. Now looking into our downstream operations and I'm on slide 6, starting by our commercial activities. So you may see that the commercial activities have delivered a robust performance given the challenging environment, although with oil and gas sales clearly down compared with last year. But if we compare with the 2nd Q, we saw a supportive recovery trend, especially on the retail segment where oil sales increased over 50% Q on Q, also of course supported by the summer driving season. This was also followed by the recovery of other value added segments leading to a strong quarter in our commercial division. Of course, under the present market circumstances, we maintain our cautious outlook for the months ahead as the outbreak is far from being under control. We will keep the course, the focus on the business optimization and the operational efficiency. On the refining and midstream arena, really, really tough, tough times especially for refining. We saw the first half of the year ending with worldwide inventories at high levels. After the lockdown measures in Europe East, we saw refineries or most of the refineries increasing crude runs and a lot of in tank volumes returning to the market. At the other hand, the demand for oil products remain kept by concerns over COVID. This is dreadful combination, which is leading to record low distillate prices and negative margins across the industry. Still, our midstream segment was supported by our trading activities, which behave quite well, inclusively comparing with last year. Looking forward and considering the weaknesses of our refining environment, we are reducing the utilization of lower conversion units, especially the fuels plant of Matusinsk refinery. And this should last for most of the quarter. We are assessing options for the production of low to no carbon products in our refining sites to increase the resilience and the competitiveness while reducing the carbon footprint, adapting to market trends and of course to the future EU regulation. These projects are mostly targeting the usage or the reconversion of existing facilities or benefit from the utilities and services already available in our sites and therefore entail only incremental investments. Moving now to Renewables and New Businesses division on slide 7. We have now completed the solar acquisition in Spain, becoming a leader in the solar marketplace in Iberia. Currently, we have 9 14 megawatts of solar projects in operation through our joint venture with ACS. The capacity should reach 2.9 gigawatts by 2024, when we expect to also have our projects on stream in Portugal, totaling around 3.3 gigawatts on a gross basis. We are fully committed to continue to identify efficient solutions to maximize the project's generation capacity and also to explore the potential of these high quality, premium located solar projects, all of which with grid permit, which I underline. The size and quality of this portfolio will allow us to accelerate the integration across the power value chain and the development of our low carbon business. Additionally, we keep pushing and we keep pushing forward new businesses, leveraging our strong position in Iberia, core competencies and also the integration of innovative concepts to create new cleaner and more valuable energy solutions. This includes also the assessment of projects related with the upcoming energies like the hydrogen project in Synt that we flagged in the recent past and advanced biofuels such as sustainable aviation fuels, taking advantage of the circular economy potential and its alignment with the EU strategic goals. At the same time, we are also exploring consumer driven experience solutions related with sustainable mobility and also the decentralized energy generation, which solution we have just recently launched in Iberia. Moving now to the operation related with our gas infrastructure that we have announced early today. And I'm on slide 8. As you will have seen, we have agreed the sale of 75% of our regulated gas business. This transaction was well flagged and is part of our asset rotation strategy, crystallizing value from assets in high demand and strengthening our financial position. This also supports the company plans to develop projects more aligned with the energy transition process. Looking at the numbers of this transaction, we have a total consideration of 368 €1,000,000 for the 75 percent stake equates to an implicit enterprise value of about €1,200,000,000 which represents roughly 13 times EBITDA. We will use the proceeds to further reinforce our balance sheet and support our investment plan. Moving now for slide 9, and I would like to leave you with some key takeaways. 1st, we will keep the execution focus and also the financial strength that got us to where we are today. Secondly, delivering on our outstanding projects remain our priority. I think nothing highlights better the strengths of our core portfolio than being free cash flow neutral during the most difficult period our industry has ever gone through and considering the solar acquisition during the period. With asset rotation move that we have executed this year, we should be very much on track to met our €500,000,000 to €200,000,000 annual average net CapEx guidance for the period of 2020 2021. Ultimately, and as we approach the end of the year, we find ourselves in a supportive financial position with a net debt falling under €1,700,000,000 once the GGND sale completes. I'm moving now to slide number 10. And I would like here to conclude by addressing Galp's sustainability profile and the journey ahead. Our portfolio holds today a set of world class assets, which combine industry leading cost competitiveness with a recognized carbon intensity performance. And we said in the past, we want to improve this further. With today's announcement, we reaffirm the ambition to reduce progressively our carbon intensity, promoting the energy transition and supporting the EU climate targets by 2,050. And in that path, reduce the carbon intensity of our activities by at least 15% by 2,030, considering 2017 as the base year. This is expected to be met primarily as a consequence of our existing strategic guidelines. We will continuously explore other solutions that may prove to be technically and economically feasible and that can combine value creation with the reduction of our carbon intensity. I have mentioned a couple of them today. Until then, we have the responsibility of not establishing aggressive targets that may have failed to deliver, but at the same time work to develop new ways of sustainable technologies and business models which may allow us to improve the environmental impact of our future activities and the usage of energy and services that we'll provide to our customers. So we will keep our long standing commitment to disclose our emissions and impacts of our activities using the best principles, using methodologies that are clearly understood and externally verified. So I'm finished here and I hand over now to Filip to go through to the financial. Filip, the floor is yours. Thank you, Carlos. Good morning, guys. I will keep it short starting with the P and L on Slide 12. So you will have seen group EBITDA of €401,000,000 in the quarter and that's down over 35% from last year given the very tough environment we have been operating in, in all our Upstream EBITDA was €302,000,000 that's 36% down from last year with average Brent of under $43 in the quarter and that's some $20 per barrel below last year. And we also have the weaker dollar and this more than offset the production growth. Quarter on quarter, the increased EBITDA came mostly from improved oil realized prices. This was supported by higher Brent and more normalized freight costs. And these positives more than offset the even weaker dollar. Now on commercial, EBITDA was $105,000,000 down 7% from last year, despite oil and gas volumes down 30% 25% respectively. Now the decline in volumes has mostly been driven by jet fuel and bunkers, which as you know are higher volume lower margin businesses. Refining and Midstream EBITDA was impacted of course by the very harsh refining environment, although this was partially offset by a good midstream quarter supported by our trading activities. On the renewables and new businesses, we have completed the Spanish solar portfolio acquisition at the very end the quarter. So hence, we have no relevant contribution to Galp yet. And such contribution will be booked under associates, so it's below the EBITDA as we are not consolidating this business. Financial results in the P and L were quite negative with over 60,000,000 coming from mark to market valuation on September 30 of financial derivatives to cover natural gas prices and related dollar euro hedges. Now as we delivered the molecules to our clients over time, these mark to market valuations get compensated. P and L taxes basically reflect the upstream tax on production and this leads to a Q3 net income of minus 23 €1,000,000 On slide 13, we have our cash flow statement. Year to date, IFRS EBITDA plus associates was €731,000,000 with a full €380,000,000 from the 3rd quarter only. And the 9 months working capital release was almost €400,000,000 mostly driven by inventory markdowns, which have also affected the IFRS EBITDA. And the cash flow from operations for the 9 months was €794,000,000 of which €391,000,000 generated during Q3. So cash flow from operations in Q3 of €391,000,000 euros And net CapEx year to date was 387,000,000 euros 387,000,000 before the Solar acquisition. And this leads to a pre acquisition free cash flow of about €300,000,000 And in the 9 months, we have distributed €318,000,000 to our shareholders. This is related to the 2019 fiscal year as well as €223,000,000 to Sinopec. Now, I think this cash flow slide is an important one. So with low oil prices, terrible refining margins and a much, much lower commercial volumes, This perfect storm still brought Galp some €300,000,000 of free cash flow in 9 months and before the Solar acquisition. So I would say this crisis should help to differentiate the Galp Equity story even more. And in our case, we also have a high quality long life asset base with good free cash flow visibility over many years and with much less reinvestment risk. My 3rd and final slide 14, on the balance sheet. So net debt to EBITDA was up to 1.3 times with the combined effect of higher net debt from the Solar acquisition and lower EBITDA of course. Now this should improve as we conclude the divestment in GgND. And finally, we have maintained our strong liquidity at about €3,000,000,000 cash of €1,700,000,000 and undrawn credit lines of €1,300,000,000 And that's all from my side. We're happy to take your questions. Your first question comes from Oswald Clint from Bernstein. Please go ahead. Thank you, everyone. Thank you very much. First question, yes, I think, I mean, you clearly executed the portfolio high grading pretty well, which came this morning. But just as we think about that, I just want to get your thoughts on how those steps completing of those deals and really the overall cash flow you've just been speaking about in the Q3 and if 4Q even holds at these levels, really this gives your conviction around exiting the year with a strong balance sheet. It seems like you're a little bit more positive this time than you were back at the end of the second quarter. Certainly, with that net debt number you're talking about, and you could easily be 1.1x, 1.2x net debt to EBITDA for the end of the year. I just want to think about whether those numbers seem fair at this point. And second question, please, was just on the gas export system here in Brazil. Obviously, the as we think about potential earnings contribution, we still need the gas the gas market bill, I think, still has to be passed in the country. So I'd love to get your thoughts on when that's or your expectations around that bill and your plans for signing up new customers for Galp in the country, please? Thank you. Hi, Oswald. Good morning. So thank you for your questions. Yes, the range that you have mentioned for the net debt to EBITDA, it's within the range that we are forecasting for the end of the year. So I think there's no much details to go further in-depth on that. In relation to the gas export system, this is a, I would say, an opportunity for all the players and we should remember that Galp is the 3rd player in Brazil. So the liberalization of the gas market in Brazil is a unique opportunity. Of course, we have gas associated. So just you to have a global perspective that represents about 12 percent of our production. And therefore, it is a beginning this could flag the beginning of going into the market and start to explore the Brazilian market that is a tremendous opportunity for all of us. We have already some opportunities developed to place part of that gas and we are exploring additional ones. So clearly one of the hotspots to the near future. Thank you. Thank you. Just Philippe will complement a little bit the first part. Good morning, Oswald. Your question steps to M and A completion. So the solar transaction is completed. The GGND transaction will follow the normal regulatory approvals. And the trust, some minority shareholders, we don't expect any issues. We have a super credible buyer, no overlapping assets. It is not impossible that this closes this side of the New Year, but the base case is Q1 next year. Your question on cash flows, I think your numbers are broadly correct. 1.1 times seems fair as we delever our balance sheet post the GND divestment. Thank you. Thank you very much. Thank you. And your next question comes from Thomas Adolff from Credit Suisse. Please go ahead. Good morning. Just a question on refining. I'm not sure what your view is on refining margins longer term, but Matosinho Refinery, you're looking to reduce runs there in the Q4, but have you also considered potentially closing that refinery and maybe building a renewable diesel facility there? That's the first question. And my second question is on production in 2021. Obviously in 2020, your guidance has come down to 10% year on year. You targeted something bigger than that at the start of the year. You had some outages related to COVID and then the ramp up on Bediqao. So it has also been slowed down on the back of COVID. As we look at 2021, how should you think about how should we think about production growth? Thank you. Thank you, Thomas, and good morning. So in relation to our refining system and globally we are observing the low cracks for the last decade. And of course, all the refineries with low conversion capacity are even suffering more. So what I've mentioned to you is that under this persisting weakness environment for refining, of course, we have to look at the operations also in an economic approach and that was the reason why we have looked at the fuels plant and we have shut down during this quarter. We are still evaluating and considering alternative scenarios for the future developing of our refining system. Once we will have them stabilized, we will come with news flow to all of you. In relation to the production, of course, by reducing 2020, we will have different expectations for 2021 in terms of guidelines. I will let Thor will elaborate a little bit on that. Thank you, Carlos. Thomas, it is for us too early to say something about 2021. Our focus now is really to deliver on 2020. And then we really need to assess the whole situation with the impact on COVID. COVID has an impact because we for precautionary measures have less POB on different installations than what we normally would have in order to try to confine the issue with COVID. That is why tie up of new wells are going somewhat slower than expected. So but with respect to 2021, let's come back to that next year when we will make an update for you. Focus now is to deliver on 2020. Thank you. Thank you. Thank you. And your next question comes from Mehdi Enabati from Bank of America. Please go ahead. Hi, Tom. Good afternoon, all and thanks for taking my question. So two questions please on my side. First one regarding your organic CapEx, excluding asset purchase and asset disposal. Should we expect a decrease in your organic CapEx in 2021 versus 2020? I am asking just because operators of Bacalhau and Rovuma LNG project are currently working quite hard to lower the CapEx for this project. So do you see any potential CapEx saving from those projects which might lower your guidance for next year compared to 2020? And a second question regarding your OpEx in the Upstream division. I mean, OpEx per barrel has been extremely low. You were at $1.9 per barrel despite I might have expected some extra cost due to COVID-nineteen. So can you please tell us if there has been any kind of one off which might explain such a low OpEx in the Upstream or if you have been able to lower the costs and then with the ramp up of the other units, operating costs should remain that low in the market? Thank you. Hi, Mehdi. Good morning. I will take your first question. So actually we have to look more in detail what will be the organic CapEx because that has to do also with the development projects that we have. What you know and I had mentioned to you during my initial introduction is that if you compare in average terms '2021, you should consider a CapEx between €500,000,000 €700,000,000 So that's what includes our forecast and that's what it should be considered. But we have to revisit that and came with a more clear perspective during the CMD in the beginning of next year. In what concerns to the OpEx in the upstream? So I will let and ask to Thor to go in detail. Thank you. Thank you, Carlos. Yes, the unit cost of $1,900,000 was indeed low. There's really the main reasons associated with that is that we've had somewhat lower production in Angola and that has benefited the unit costs, so it's somewhat lower. There is in the second quarter, we also had a one off effect with respect to paying a bonus to one of the FPSO performers. And thirdly, we're also actually benefiting from the foreign exchange rate, the weaker dollar has also benefited us. So that is really the key reasons for this number versus last quarter. Thank you. And sorry, you might then explain those costs to go back to kind of normal level of 2.7 dollars 3 dollars per barrel in the coming quarter? So that is what we're using ourselves for the internal planning basis for the time being? We will of course also with respect to this do a total review when we are then putting in place the budgets for 2021 and onwards, but for internal purpose at this stage, this is what we're using, yes. All right. Okay. Thank you very much, both of you. And your next question comes from Alwyn Thomas from Exane. Please go ahead. Hi, good morning or afternoon, maybe just now. A couple of questions from me. Carlos, if I could just ask perhaps a little bit more broadly, we're going through most of this year and the change that you've had to enact this year, how do you think about the company strategically going forward? Do you think there will be greater shift to green versus what you've planned at the beginning of the year? And what do you think it means to your Oil and Gas business going forward? Where do you have to adjust for forward outlook? And then perhaps could I just get some commentary on guidance and where you think the dividend perhaps will be or roughly how you're thinking about the dividend at this point going into the CMD next year? Thank you. So thank you, Alwyn, for your questions. So from the strategic point of view, I think back in February, we have anchored and gave to you the key avenues that we were launching for the next decade. You have saw that the CapEx location that we have decided was to be above 40% related with energy transition initiatives and we are progressing on that including there our gas projects in Mozambique. So when you speak about being more greener, actually that will include gas and power developments as part of our strategy. You have also seen during the year increasing our exposure to the renewables spotlight. So that will also imply that we will deepening and accelerate the process of having more electrons inside of our energy mix is also something that is absolutely essential for the future of this company. And progressively, we have also to take in consideration that the full energy mix will require different typologies of energies. And we have I don't know if it is the luck, but for sure we have to take the advantage of such a high quality set of assets in our upstream portfolio. And we have a lot of value to continue to extract from that. So the ambition to continue to increase the recovery factors and to extract more value from that And cash and using that cash to finance both our CapEx and as well our dividends, it's something that is important. In the commercial front, the transformation and the adaptation to the new business models, which includes more digitalization and more electric mobility, different solutions like it is the case of the decentralized power generation. They are a set of initiatives that we have to concentrate ourselves. So we cannot disperse. We have to be focused from one side, but the other we have to accelerate because the opportunities to do this change and to do this transition, they are there today, but they might not be in the day after. In what respects to the dividend policy, as I mentioned before, we will only speak about that after the year end results. So but you are seeing that as the time goes by and our cash position are being consolidated, that gives also some signs, but still certain uncertainty in the system. So we have to wait by the year end and take the decision after that. Thank you. Okay. Thanks. And your next question comes from Sasikanth Chalukuru from Morgan Stanley. Please go ahead. Hi, good afternoon. Thanks for taking my questions. I had 2, please. The first was regarding the solar PV assets. I was just wondering if it was possible to provide an updated timeline in terms of development and execution to reach the targeted capacity of 3.3 gigawatts by 2024 at least for the capacity expected by the end of 2021. ACS and Surpass announced sale of its COBRA business to Vinci. I was just wondering whether this has any implication on the development timeline in your view. Also wanted to check your whether your expectations of around €600,000,000 of equity CapEx to develop these assets was still valid. My second question was mostly a clarification. I just wanted to check regarding the Bakugou project, whether you would still believe that an FID is in progress will be taken next year or if there's any expectation of it being realized a little quicker as well? Thanks. Good morning, Sassy. Thank you for your questions. So in terms of timeline, what we have is that we have already around 1 gigawatt that is under production. Actually, it's 926 Megawatts because that splits between our solar PV projects of 914 and a small wind farm that we have with 12 megawatts. So looking forward, we will addition in Spain next year 500 megawatts, the year after around 1 gigawatt in 2023 more or less half gigawatt. So we have also some projects in Portugal that are also being developed with a similar pace, which means by the end of 2024, we should have these 3.3, 3.4 gigawatts project fully development. From the equity CapEx point of view, we are not so far away from the figure that we have you had mentioned. So clearly, you can assume that as a target. In what respects to Bacalhau, I like the floor for Thor to go in details on that. Thank you, Carlos, and thank you for the question, Nancy. On Bacalhau, it's moving very well ahead. We are very pleased with the project and it's moving according to plans. Also very happy now that we agreed with the operator to retender the rig services because we think there is really a market opportunity now to further improve the overall profitability of the product. So full steam ahead, this will be a very exciting addition to GALB's portfolio when it comes in stream in 2020 4. Thank you. Thank you. And your next question comes from Biraj Borkhataria from RBC. Please go ahead. Hi, thanks for taking my questions. Just one clarification and one question. In refining, I believe you have no more hedging in place. Could you just clarify whether there is anything in place for 2021? Or you've just I'm assuming you haven't been able to given where refining margins are? And then the second question is on the carbon intensity target. When we think about the portfolio from now to 2,030, obviously, the biggest change is going to be Mozambique LNG added into the group volume. So can you just clarify or give some perspective on the carbon intensity difference between the base portfolio and Mozambique LNG? I'm just trying to understand whether the reduction is just a function of that mix change plus renewables or if there's anything in addition you're doing to sort of drive that lower? Thank you. Hi, good morning, Biraj. Thank you. So in relation to the hedging, the refining hedging, you're absolutely right. We don't have nothing in place. We have monetized them back in the first half. So you are aware of that. So on climate carbon intensity targets, most of the so there is a set of contributions for that. That came across all across the company from the efficiency of the operations up to the new renewables business that we are integrating now and accelerating in the coming years. Clearly, one of the key contributors is the capacity of being an integrated company and selling more electrons to final to end users, let's say, in that way. That's what it will contribute more. So the more we sell in terms of electrons to our customers, the better for this process. Of course, the more renewable energy we will have, the better because that also will have positive implications in the mix that we contribute for the full mix. And the efficiency that is also related not with energy consumption, but also with the nature of the products that we will produce all over the next decade. So everything that is more or less carbon content and more other components content is better, including the biofuels, including other sort of products. And with time, I think hydrogen also could play an contribution in this process. So it's basically an analysis that has been done in a well to the will and has to do with the strategy that we have released to you. And we were waiting just for the fact that we asked for external of certification. In relation to Mozambique, it's very small implications in this process. So it's included, but the integration of our efficient upstream portfolio is one of the key elements and also one of the key contributors for that. By the way, we will put in our side some details on the methodology and more information for that. Thank you. Thank you very much. And your next question comes from Joshua Stone from Barclays. Please go ahead. Thanks. Good afternoon. I've got 2 more questions, please. Firstly, just on net debt. You talked about a level below €1,700,000,000 Should we see that as a level you're comfortable with inside the business? Or actually next year, would you rather see that number go lower over time during the next over those next 12 months? And then secondly, back on CapEx, when you look to next year, can you talk about your willingness to pursue more inorganic opportunities in the market? Or given your transactions this year, should we see the rate of M and A slowing down? Hi, Josh. Good morning. I will take the second question even though I think we have already mentioned the first one. So for the next 12 months is which seems to be an immense period of time under the present circumstances. Inorganic opportunities, we have always to them, especially in the new front or in the new arena related with the renewable businesses. Even though we have to now to look ahead and we have a sort of assets that we have to put under production. So we will keep relatively occupied on that front. We will look at the opportunities in a very disciplined financial wise and economic wise way as you recognize from our profile. So that those any of those decisions that we might take, they always have to comply with the principles that we have released to you. So yes, we will continue to observe. That doesn't mean that we will execute Matura. We have that obligation. So Philippe, can you please elaborate a little bit on our net position, please? Good morning, George. So the guidance we have consistently provided the market is that we would go no higher than 2 times net debt to EBITDA. And so there will be no change to that. The driver of the absolute level of net debt in euros, of course, we need to take a view on the EBITDA that we are looking look at 5, 10 years down the road what sort of EBITDA is this company going to generate and CapEx levels. So because of the very high longevity of our portfolio, there are no plans for inorganic acquisitions nor do we need to given how big the opportunity set is already inside Galp. Plus CapEx that we do plan to deploy in taking more out of the potential in Brazil. So we see potentials in plateau times and well productivity, Phase 2, Lola. So our CapEx goes into projects that you know. So it's derisked CapEx and this is going to consume what we call organic only CapEx. So you have Bacalhau coming up and you'll have Mozambique coming up. Other than that, there should be nothing to affect our net debt levels. Thank you. Thank you. And your next question comes from Anish Kapadia from Palynziq. Please go ahead. Hi. Good afternoon. I had a couple of questions. Just thinking strategically about Angola, it's now a fairly mature asset now that Block 32 has come online and the rest of the assets are moving into decline. It doesn't seem like there's a lot of upside potential. So I'm just wondering what's the strategic rationale for Galp holding on to the asset over the next couple of years or so. What's the future that you see for Angola Upstream? And then the second question is just thinking in terms of growth ambitions and kind of Galp over the longer term. Previously, in terms of your exploration business, one of the stated policies was to explore in Portuguese speaking countries. I was wondering, could we see a similar type strategy for low carbon investment going forward over the next few years? Thank you. Good morning, John. Hope to find you well. So thank you for thank you. No, it's Anish, I'm sorry. Anish, sorry. Good morning. Hope to find you well. Good morning. So Angola Block 32, so I think we are in a moment that we have all the optionality is to continue to optimize these assets. And I think this should be our priority. You see, if you go back to the Block 14 for instance, every time we start to say that is starting to decommissioning, we find always some routes and some alternatives to continue to extract additional valuable volumes. So I think Block 32 is in early stage and plenty of incremental optimization alternatives going forward. And bear in mind that the margins that we get from our portfolio including Block 32, it's quite significant. So it's a good asset going forward. About the strategy of new business and renewables, if we will follow the Portuguese speaking countries strategy? The answer is yes or no or it depends. So in the matrix that we are considering to looking abroad Iberia where we have an integrated operation, we have to consider the risk profile of the different opportunities and different geographies. And of course, the geographies where we are already present ranks higher than the others, which means from that perspective, countries like Brazil, for instance, could have an important role in this process. But we have to look more broadly to other geographies. We have a well skilled experienced capable mature people, team that has experience in many countries that goes beyond the ones where we are today. And we have to consider not only the fact that we have a strategic angle by being present and the relationship with the Portuguese speaking countries, but also looking at where are the opportunities in this new and combining both. So it's a combination of a set of different subjects or elements that we have to consider on deciding to enter in a new geography. To conclude and to summarize, yes, we will consider the Portuguese speaking countries, but no, we will not exclude anyone, any country that could offer a potential opportunity to Galp. Thank you. Thank you. And your next question comes from Matt Lofting from JPMorgan. Please go ahead. Hi, gents. Thanks for taking the questions. First, could you just talk a bit about the strength in demand that you're seeing for the Lula Iracema crudes? I thought it was noticeable that apart from higher absolute prices, the discount to Brent in terms of the average oil and gas realization narrowed substantially Q3 versus Q2. I wonder to what extent we can read through from that in terms of what it tells us around demand, particularly incremental demand off the bottom from Asia. And then secondly, can I follow-up on the earlier question and the points that you made on the introduction of the 15% decarbonization target to 2,030? I mean, if I understand correctly, it sort of sounds like you're saying that the sort of the natural portfolio mix change through the 2020s will be the key driver of that 15% reduction. I wonder with that in mind and if that's correct, whether you see the 15% reduction as being more of a base case output of the sort of the portfolio mix change through the period or a stretch target? And if it's the former, what could be the key sources of potential upside that could ultimately deepen that 15% target as we move forward, for example, dependent in part on where your evaluation comes out on the medium term strategy around the downstream refining and potentially hydrogen? Thank you. Hi, Matt. Good morning. So in terms of the realization price, I think there are 2 components that are important to take that and to see what happens. So increasing demanding from Asian markets, so it is the first one. And the second contribution is the freights that have been significantly reduced during the quarter. So these 2 have clearly give us a push in our price realization price. In what considers to the carbon intensity targets that we have set up for 2013, they were based on our strategic guidelines that have been released to you or announced to you back in February. So this is nothing different from what we have said. It is what we can call our base case. There are differences in terms of portfolio, yes, And you know them. So we have committed ourselves to invest and to allocate capital for the energy transition related projects as I mentioned to you. The renewables front is one of them. One that is important is also to review and to optimize and to produce cleaner products from our refining system, which is also an important milestone or contribution. Being more efficient. So from the energy efficiency point of view is also important. And the one that is more relevant as I mentioned before is the electrons that this company will sell to the market. So it's producing and selling electrons in our portfolio. So these are based on what you already know and it is embedded in our strategy. So we take a while during this period just to certify our model to guarantee that we are launching our base case scenario related with our strategic guidelines. Over time, if we change by any means our strategy, we have to also to adjust the targets. And I think there are, of course, downsides, but there are some upsides that are relevant depending on the pace and the speed of the development that we will be able to do in the next decade. So we are relatively comfortable with the targets that we have set up. And I think sooner or later we will be able to accelerate these targets. Thank you. Thanks very much. And your next question comes from George Guimaraes from JBC. Please go ahead. Hi, good afternoon everyone. My two questions would be, first, it possible to elaborate on the mark to market losses in the gas trading because I believe you approached this issue early in the call, but I did not quite understand your explanation. And together with this, if there are any news about the CO2 losses that you booked in Q2? And the second one would be related to the Rovuma project in Mozambique. There were some news that the consortia was looking for reductions in CapEx. Is it possible for you to comment on this? And does it mean that the FID will be delayed, let's say, to 2022? Thank you very much. Georges, good morning. So I will ask my colleagues, Philippe, to take the first question and then Thore to take the second one. Thank you. Good morning, George. These are mark to market valuation. These are not losses. What we have at Galp is a significant client base for gas molecules that require euro and TTF indexed formulas. And most of the gas that we have in our portfolio are purchasing contracts either from Nigeria, from Algeria or others are in dollars and are rent indexes. So what we do when we have a new client, typically large industrial clients, we before we close with the clients, we will go to the derivatives markets and offer the clients what he is seeking and that is euro denominated TTF linked assets and we protect the cap, the basis risk between what we buy and what we sell. So we're hedged and we've locked in our margin. And fortunately, in the P and L, this is P and L only, you have a lot of volatility every day. And the picture you see on September 30 could be completely different the day before or the day after given how Brent will vary. Our client positions are not mark to market. Our derivatives are. So you have temporary mismatch in the P and L only. I hope this was helpful. Good afternoon, George. And then regarding your question relating to Rovuma LNG. Yes, it is correct. As you have seen that FID has been delayed. What we are really doing right now is that we are running a comprehensive value enhancement plan in order to see how we can further optimize the product both on the midstream level and on the offshore level. This is work in full progress. I expect that the that we sort of in the beginning of next year, we'll then sit down and look into what are the results and from then decide what is going to be the way forward. So we have not set a new target for FID at this stage. Thank you. Thank you. And your next question comes from Michael Alsford from Citigroup. Please go ahead. Hi, good afternoon. Thanks for taking my questions. I've just got a couple. Just to follow-up on Brazil and the potential for Phase 2 at TP in Iracema. I'm just wondering if you can give a sense as to where that sort of project sits and the priorities of the operator. And really how meaningful could it be in terms of reducing decline rates from that 2P and Irasimha area? And then just secondly, to follow-up on the strategy in solar, You've highlighted the opportunity in this area, particularly across Iberia, but others have also seen the potential, and competition is pretty high, as you've seen with the recent low bid in Portugal. I think it was around €11 a megawatt, I think. So could you maybe just update as to what you're expecting in terms of what are you targeting in terms of returns? And how you compete, I guess, and your confidence in achieving them when competition remains pretty high? Thank you. Hi, Michael. Good morning. I will take the solar question and Antoine will go through the Brazilian one. So yes, we have observed highly competitive solar auctions in Portugal and we have observed that Gulf was completely outside of that. So we have some projects already under development in Portugal in a completely different economics framework. And we do see different approaches comparing with ones that are have been visible in the auction, especially from entities that have very low financing costs and probably with other returns required other than the ones that we are aiming for. So clearly, we continue to have these targets or this range of having a double digit IRR, equity IRR in the projects that we involve ourselves in this marketplace. And we will continue to be very selective in the projects that we choose and we involve with the same financial discipline that you know. So the competition is high. We have the advantage of having this integrated profile, which obliges the others to be more exposed to the market. And that's probably the reason why we are observing this kind of approaches. Brazil, Thor, could you please elaborate? Good afternoon, Michael. Lula Resema or 2P Resema, which is, of course, is the name today, is by any standard, world class offshore development. As you know, we think there are something like almost 20,000,000,000 barrels of oil in place. So there's a lot to work with. We started out in our business plan having an expected recovery factor of 28%. Gulf is today around 34%. And I would say that has been really good work and alignment in the partnership over the last several months with Petrobras and with Shell. And I think we are getting very close to an alignment of what could be a very exciting second phase development of this field. So very good work. It sits very high on the priority list for Petrobras. Petrobras is doing an excellent job. And I think there's very good collaboration in the partnership. And I think we are starting to see some real realism on this ambition that Galp has stated actually 5 years ago that we should target more than 40% recovery in this field. There is a lot to come in Lula to get a semi in the years to come. Thank you. Thanks, Thor. Thanks, Carlos. And your next question comes from Jason Kenney from Santander. Please go ahead. Good afternoon. Yes, I was just looking for some insight on the moving parts for associates. And I vaguely recall back in 2013, 'fourteen, we had quite good disclosure on associates. But it's been a bit hit and miss over recent years. Average is around €140,000,000 per year, 2017, 2018, 2019. Obviously, you're swapping 1 out, G, G and D and 1 in with the solar associate. So are we still should we still be expecting that kind of level of associates contribution going forward over the next few years? Secondly, on minorities, again, really just more clarity. It seems to be more volatile than just simply Brazil movements would imply. Is there anything else in minorities that are marked missing? Thanks. Hi, Jason. Good morning. Hope to find you well. So, Philippe will elaborate in both questions. Thank you. Good morning, Jason. The difference in associates from the past and going forward is as we as members of the consortium in Brazil, we have this 2 PBV in Holland, renting out equipment Brazil. All that equipment has been nationalized, meaning it's been exported to the consortium in Brazil. So that is now captured within the EBITDA and less within associates. So we're going to lose that and we are losing that. Ggnd will also become non meaningful. We have the solar is going to be the big driver of that plus some of the pipelines we have, be it the CLC pipelines in Portugal or the pipelines into Maglev that we own. Thank you. On the minorities, no, this is purely volatility from the P and L in Brazil, and that's 30% of the consolidated P and L of MetroML Brazil. Thank you. Okay, thanks. And the final question comes from Rafael Dubois from Societe Generale. Please go ahead. Good afternoon. Two questions, please. The first one is, you took some restructuring charges in Q3. Can you please give us some guidelines for what is left to be expensed and cashed out? And with regard to the ACS Solar assets, can you please tell us how they operated compared to expectations over the month of September when you booked them, at least in the associate line, maybe in terms of load factor? And it would be great to know what sort of realized price was obtained? I will ask Philippe to go through the questions. Thank you. So the restructuring charges are the unfortunate cost optimizations that we had to instill throughout the organization given the context. Most of the people will be retired. So this is going to be a long cash out process until they reach the age of going into the Social Security typically when they're 67. So there is some people that have left voluntarily. So we've agreed some cash out, but most are pre retirement agreements. And the entire €40,000,000 or so that you see is related to that. So the what we call the Your question on the solar performance, it is as expected. So the production is going according to plan. We have, of course, summer months, so it's actually 20% over the expected average for the month. And the pulp prices have recovered quite significantly in Iberia. So, all going according to expectations when we model the acquisition price. Thank you. Thank you. So this concludes today's conference call. Thank you all for participating. Hope it was a useful one for you. The IR team will be glad to follow-up on anything you might need. Have a great rest of the day and results season.