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Thank you, Charlotte. Good afternoon, ladies and gentlemen, and welcome to OMV's earnings call for the first quarter 2019. With me on the call are Rainer Seele, OMV's Chairman and CEO, and Reinhard Florey, our CFO. Rainer Seele will walk you through the highlights of the quarter and will discuss OMV's financial performance. Following his presentation, both gentlemen are available to answer your questions. With that, I'll hand it over to Rainer.
Thanks, Florian. Ladies and gentlemen, good afternoon, and thanks for joining us today. The start to 2019 was solid but softer than expected given the weaker macro environment and to the difficult security situation in Libya. Let me start by briefly reviewing the economic environment. Brent increased from the low level of $53 per barrel at the beginning of the year to $68 per barrel by the end of March, averaging $63 in the first quarter of 2019. Main drivers were renewed U.S. oil sanctions on Venezuela, lower OPEC Plus production, the market expectation that OPEC Plus supply cuts will be continued until June, and a more positive outlook for demand. On average, Brent prices were down 6% year-on-year and 8% quarter-on-quarter. European gas prices were 5% lower year-on-year and 22% down compared to the previous quarter.
The price decline was mainly caused by warmer than normal temperatures and above average storage levels across Europe. In addition, the slower growth of Asian LNG demand, coupled with the ramp-up of U.S. supply, loosened the global supply situation significantly. As a result, substantial LNG volumes targeted Northwest Europe during winter months. The refining indicator margin started the year on a weak note. Although it improved slightly in February and March, the first quarter of 2019 was the weakest quarter since 2016. The margin declined 16% year-on-year and 23% quarter-on-quarter. Gas oil and fuel oil cracks came down from the high levels seen in the fourth quarter of last year, but remained strong. Light distillates cracks decreased sharply due to the global oversupply of gasoline. Ethylene and propylene margins were flat year-on-year but declined by 10% compared to the fourth quarter of 2018.
Butadiene margins came down 30% from the high levels recorded in the fourth quarter of 2018, they were 35% above the prior year's quarter. Benzene margins fell sharply both year-on-year and quarter-on-quarter due to oversupply in the market. Let me briefly point out the key developments of the first quarter of 2019. The weaker economic environment and the temporary shutdown of the El Sharara field in Libya negatively impacted our upstream earnings. On the other hand, downstream earnings were very resilient despite weaker refining margins. Our cash generation remained very strong with a cash flow from operating activities of EUR 1.2 billion, excluding net working capital effects. At the operational level, we recorded a strong performance both in upstream and in downstream. We further increased our production to 474,000 barrels per day and reduced the average production cost to $6.8 per barrel.
The sales volumes could not follow the increase in production as we had no liftings in Libya. In downstream, we continued to run our refineries at an exceptionally high realization rate of 98%. In the first three months of this year, we made significant progress towards our strategic goals. In January, we signed the acquisition of a 15% share in ADNOC Refining and in a to-be-established global trading joint venture. With this transaction, OMV expands downstream internationally and establishes a strong integrated position in Abu Dhabi along the value chain, spanning from upstream production to refining and trading and petrochemicals. The transaction is expected to be closed in the third quarter of this year. In February, we closed the acquisition of a 50% share in the new company, SapuraOMV Upstream.
In March, we signed two memoranda of understanding with ADNOC to explore new opportunities for collaboration in the petrochemical sector and to assess the feasibility of a scalable Re-Oil plant in the United Arab Emirates. Let's now turn to our financial performance in the first quarter of 2019. The Clean CCS operating results came in at EUR 759 million, down 7% compared to the first quarter of 2018. As mentioned already, our results were negatively impacted by the temporary shutdown of El Sharara field in Libya for most of the quarter. Despite the restart in March, we had no oil sales in Libya in the first quarter of 2019. As a consequence, sales of 2.9 million oil barrels were missing with an earnings impact of approximately EUR 140 million. Additionally, we recorded EUR 106 million higher depreciation, mainly due to the acquisitions in New Zealand and UAE, as well as SapuraOMV in Malaysia.
The clean tax rate was 34% and thus on a similar level as in the previous year's quarter. Clean CCS net income attributable to stockholders amounted to EUR 346 million, 8% lower compared to the first quarter of 2018. Clean CCS earnings per share came in at EUR 1.06. Let me now come to the performance of our two business segments. The Upstream clean operating result decreased by EUR 45 million to EUR 393 million compared to the first quarter of 2018 due to the lower oil sales volumes and higher depreciation. Market effects had a positive impact of EUR 98 million compared to the first quarter of 2018. OMV's realized oil price rose by 3%, while the realized gas price increased by 5%. This was due to higher gas prices in Romania and the two-month time lag effect for half of our Russian gas volumes.
The high level of the European gas market in the fourth quarter 2018 is partly reflected in our realized prices of the first quarter 2019. Production went up by 37 to 474,000 barrels per day, mainly driven by the acquisitions in Abu Dhabi, New Zealand and Malaysia, as well as the production ramp-up of Aasta Hansteen in Norway. New Zealand and Malaysia were not yet fully reflected in the first quarter production, as there was plant maintenance at the Pohokura field and SapuraOMV was only consolidated as of February. The aforementioned shutdown in Libya, the natural decline in Romania, and the divestment of Pakistan in the second quarter of last year had a negative impact of some 30,000 barrels per day in our production compared to the first quarter of last year.
Despite an increased production, our overall sales volumes were flat year-on-year as higher gas sales were offset by lower oil volumes. The negative net impact of EUR 56 million in our operational performance was especially caused by the missing oil volumes from Libya to the amount of approximately EUR 140 million. We reduced our production costs by 8% to $6.8 per barrel on the back of higher production and favorable currency development. Depreciation increased by EUR 87 million due to our acquisition in the UAE and Asia Pacific. In Downstream, the Clean CCS operating result was almost flat at EUR 374 million. The Downstream oil result increased by EUR 17 million to EUR 299 million, despite lower refining margins. Ethylene and propylene margins were flat. Our operational performance was again strong, driven by the exceptionally high refining utilization rate, higher volumes, as well as good retail and commercial margins.
The commercial business in Germany and Austria benefited from the supply situation in southern Germany impacted by a refinery outage. At EUR 17 million, the petrochemical result was almost stable. The contribution from Borealis decreased to EUR 72 million following lower polyolefin margins, negative inventory valuation effects, and a planned turnaround of Borouge 3. The performance of the fertilizer business improved due to lower gas prices. The Clean CCS operating result in Downstream Gas declined from EUR 94 million to EUR 75 million, mainly attributable to a lack of arbitrage opportunities in the first quarter of 2019 and a lower storage result than in Q1 2018. Natural gas sales volumes increased by 15%, mainly driven by our successful marketing initiatives in Germany and the Netherlands. Let's now continue with cash flow. The first quarter was again strong with an operating cash flow of EUR 1.2 billion, excluding net working capital effects.
This was driven by OMV's good operational performance and the changes in our portfolio. We received the second 2018 dividend tranche from Borealis to the amount of EUR 144 million compared to EUR 252 million in the first quarter of 2018 for the full year 2017. This reflects the change in Borealis dividend payment for annual to twice a year. Mainly following a significant increase of inventories in downstream oil, we recorded negative net working capital effects to the amount of EUR 330 million, EUR 234 million more than in the first quarter of 2018. Organic cash flow from investing activities amounted to EUR 448 million. The organic free cash flow decreased by 35% to EUR 418 million, primarily as a result of the net working capital effects.
Turning to inorganic cash flows, divestments amounted to EUR 62 million and the cash outflow for inorganic investments totaled EUR 604 million, mainly reflecting the acquisition of the 50% share in SapuraOMV. As you know, IFRS 16 is effective since January 1st of this year. I would like to explain to you the impact of this new standard on OMV. IFRS 16 eliminates the distinction between an operating lease and a finance lease. Under the previous standard, operating leases were held off the balance sheet, and finance leases were reported on the balance sheet. According to the new standard, all leases are now reported on the balance sheet. As a result of this change, we recognized an additional liability of approximately EUR 700 million from leases in our balance sheet. Our net debt rose by approximately EUR 700 million, leading to a gearing ratio increase of around four percentage points.
IFRS 16 also impacts CapEx by approximately EUR 150 million based on our current estimates, as all qualifying leases will be included. Our 2019 organic CapEx guidance of EUR 2.3 million already covers this effect. Looking at the impact on our income statement, we expect an additional depreciation of EUR 90 million, as operating lease expenses are now reported as depreciation and interest. The impact on both the operating result and net income is only minor. Last but not least, we expect an increase of approximately EUR 85 million in our free cash flow, reflecting the classification of the principal portion of the lease payments as financing cash flow. OMV's balance sheets remained very healthy and showed strong liquidity with a cash position of EUR 3.7 billion at the end of the first quarter of 2019. Net debt increased to EUR 3.2 billion, mainly stemming from the implementation of IFRS 16.
Our gearing ratio increased to 20%. However, on a like-for-like basis, excluding IFRS 16 impact, our gearing ratio rose only slightly to 15% compared to the end of 2018. Let me now conclude with the outlook for 2019. We reconfirm our 2019 market assumptions for crude oil and gas prices communicated at the beginning of the year. Refining margins are now estimated to be below $5 per barrel, given the weaker than anticipated beginning of the year. For the remainder of this year, we expect an average production of 500,000 barrels per day. However, this depends on the security situation in Libya. We assume that Libya will contribute some 35,000 barrels per day in the remaining three quarters of 2019. Thus, for the full year 2019, we anticipate a total production of around 500,000 barrels per day.
In the second quarter, we estimate a similar market environment as in the first quarter of 2019, but a better performance in upstream. Production of El Sharara is back on stream, and we already had liftings in Libya. Thank you for your attention. Reinhard and I are more than happy to take your questions.
Thank you, Rainer. Now come to your question. I would ask you to limit your questions to only two at a time so that we can take as many questions as possible. We can, of course, always rejoin the queue for a follow-up question. The first question comes from Mehdi Ennabati, Société Générale.
Hi, good afternoon, and thanks for taking my questions. First question regarding Libya, obviously. The production restarted, and you are now producing close to plateau. I would like to know if you are able to export the crude from Libya in an optimal way in order to avoid being surprised by uplift or down lift. Can you also make an update regarding the situation at El Sharara oil field? There are some informations saying that it might have been shut. Can you also make, let's say, an update regarding the Zawiya oil terminal? Who is also controlling the Sharara oil field, and who is controlling the Zawiya oil terminal, please? Second question on the cash from operation, pre-working capital, which came inline with the first quarter 2018, whereas you did not sell production from Libya, and you received only half-yearly dividends from Borealis.
How have you been able to mitigate those two negative impacts, at the cash from operations level? Did you receive more cash from your Russian assets than last year? Is your new production from New Zealand or Abu Dhabi more cash generative than your average production? Just would like to understand here, please, how have you been able to realize such a high cash from operation? Thank you.
Mehdi, I propose that Reinhard is taking your long question. Your very long question, and I take the short one on Libya. Okay?
All right.
Reinhard, anyhow, has more understanding and view into the cash flow. First of all, we have no impact on our operations in El Sharara so far. Since we restarted the production, everything is running smoothly without any interruptions, no technical problems, no security problems so far. Knock on wood. We also can export the crude, and as I have said, we have sold already some cargos from our Libyan production, so that we have no restrictions as we speak about the situation. I don't know how I should answer your question, who is controlling what in Libya. I don't know how I should answer on this. All I can say is, the situation around our production sites in Libya hasn't changed. Everything is safe. The security guards are the same. We have no interference from political point of view.
Therefore, from my point of view, we are expecting that although the situation in Libya is pretty fragile, we are expecting that we are going to see a stable production also, in the second quarter. Reinhard, now it's up to you.
Hello, it's Reinhard speaking. Hello, Mehdi.
Hi.
Regarding your question, where does the free cash flow come from? It comes from our very strong operational cash flow that we are producing. There is no special effect in there that is specifically distorting this number. Just one comment on the Borealis dividend. You said we have received lower dividend from Borealis. This is true for quarter one. Between 2018 and 2019, there has been the decision to split the dividend in two portions, that we have received also a portion in third quarter in 2018, and we will receive the same also in 2019. You cannot compare the dividend directly between the quarter one dividend of Borealis in that sense.
Regarding the cash flow, of course, you have to take into account that the impact from Libya missing on the cash flow due to the higher tax situation in Libya is of course smaller, and that the average tax rate that we have seen in quarter one 2019 therefore has been lower, which had a positive impact on the cash.
All right. Thank you very much.
Thanks, Mehdi. Next question is from Joshua Stone, Barclays.
Hi. Good afternoon. Thanks for the presentation. I've got two questions, please. First, if I can follow up on Libya, you had an underlifting position at one Q. Do you expect to get those volumes back, and do you think you could actually move into an overlifting position at two Q and try and get back some of the lost sales volumes at one Q? Secondly, on the gas realizations, that they're clearly held up despite the fall in the hub pricing. You mentioned the lag effect, and also Romanian gas pricing. I would have thought the direction for two Q would be down given that lag effect. Perhaps you could help us understand the magnitude of that decline, some of the moving parts there, and if there's any data for April you could provide, that'd be helpful as well. Thank you.
Well, Josh, you are absolutely right. We have produced some oil in the first quarter, which we could not market and not export from Libya. This oil is moving into the second quarter. Definitely, this has a positive impact on Q2. When we talk about the gas lag effects, you are also right. Yeah. With the two months time lag effect we do have on our gas prices, and given the fact that Q1 gas prices were below the Q4 gas prices of 2018, there are lower gas prices awaiting us in the second quarter.
Yeah. Presumably, you can't help us understand the magnitude of that decline. I guess we can figure it out, but thanks.
I think you have to run your calculation yourself.
Fair enough. Thank you.
Okay.
Could we now move to Jason Gammel, Jefferies?
Thanks very much. Two questions on the downstream, if I could please. The first, you've obviously been able to preemptively schedule all your maintenance to be able to run full for the back half of the year and into 2020. Can you give us some idea of when you think we might start to see wider spreads and stronger cracks on middle distillates that are related to IMO? Is that something that you've built into the margin forecast for this year? Second question, there's obviously been some interruption in Russian pipeline oil being delivered recently. I don't think it directly affects your crude supply, but has it had any effect on your crude sourcing in pushing up Urals prices that could negatively affect the 2Q margin? Thanks.
Well, great question, Jason. Let me start with your second question on crude from Russia. First of all, we are not impacted by the situation at all because we get all our crude via cargoes in Trieste, that's the supply route for our refinery. We are not impacted. I agree with you, as I have seen no real clear message in the market how long the situation will last, it might have an impact in the mid to long term on the Urals differential, which was already a pain in the neck in the first quarter. One of the reasons why our refining margins we have seen in Europe is that the Urals differential was not in favor, especially for the Eastern European refineries.
That's something which might give another downside for the refining margins in Eastern European countries, especially, we have to see that the heavier crude globally is now running short, given the fact that the sanctions on Venezuela and Iran are really reducing this quality and is increasing the call for crudes from Russia. The cracks on middle distillates, if I would have known this. Well, first of all, when we look into the first quarter, we have seen that there was a real oversupply in the market from benzene and naphtha as well. We benefited from naphtha in our petrochemical business. We have seen now that there are higher calls for benzene, but lower calls for diesel.
What I'm expecting is that in the second quarter, we might see a higher demand, especially in Europe, picking up, absorbing a little bit the oversupply situation we see with middle distillates in the market. Do I see there a quick and a very strong return in middle distillate margins? Definitely it will depend on the situation in the U.S. and in Asia, because right now we see high imports, especially from the United States into the European markets, as demand is there pretty low. The question on IMO. We see now IMO really moving into the market, which says lower call for heavy fuel oil. We don't see it as a shift to the other product groups. What we see is that the market is asking for less heavy HFO, therefore we do see very low cracks and prices in the HFO market. This will continue.
We are expecting and calculating with positive IMO margins in the fourth quarter and on a very low level. As the new regulation will come in force on 1st of January next year, I think it would start with 2020.
That's really helpful, Rainer. I appreciate it.
Thanks, Jason. Next question is from Thomas Adolff, Credit Suisse.
Afternoon. two questions from me as well. Just going to your 2019 production guidance of about 500,000 barrels per day. In your press release and in your presentation, you say that requires at least 35,000 barrels per day from Libya. Is it fair to say that you are running with a fairly limited contingency buffer for the rest of the year? If there's a contingency buffer, how big is it? Perhaps you can talk around that. Then secondly, regarding SapuraOMV, I know it's only been a few months, but now that you sit inside of the company, perhaps you can talk about your first impressions of SapuraOMV. Thank you.
Thomas, regarding your first question on the 500,000 barrels. We clearly have seen first quarter, we missed out on the 500. However, with things going the right way, we are expecting to be able to have the production around 500,000 for the rest of the year.
Now, we are estimating the 35,000 barrels from Libya. That is not unrealistic. If there are no interruptions with the fields that we have in the east and in the western side from Libya together, we are at the level of producing 35,000 barrels. There is no need for a contingency in there. If you would ask for how much contingency above the 500 we have, we are not guiding under the impression of contingencies. We think this is the fair assessment on how our production currently runs and this is the way how we also would like to give the message to you. Do not think we are hiding any contingencies in our guidance there.
Thomas, your question on OMV Sapura, I would like to headline it lower cost and higher production than planned. The company looks much better from our operational point of view than we have anticipated when we negotiated the terms to enter Sapura. What we see is that a major priority has now financing of the projects we do have in the pipeline. We will speed up the projects. And we have really a very welcome situation in the company, because we would like to bring in now our development expertise, especially when it comes to higher CapEx spending. We should, in conclusion, say, we do not regret that we have done such a good deal.
Okay. Thank you.
Next is Michele Della Vigna, Goldman Sachs.
Thank you for the presentation. It certainly is a very busy year in terms of transaction with Achimov Sapura, ADNOC Refining. I was wondering if you could give us an idea of where you expect the gearing to be at the end of the year. Also, I was wondering if you could walk us through the progress in the Nord Stream project. Thank you very much.
Your question regarding year-end gearing, of course, is very much dependent on the conclusion of Achimov and at which conditions. As Rainer has always emphasized, we are in the process of negotiations and we are still, of course, confident that we'll be able to conclude that. This is something where we would still see ourselves eating up a significant part of our headroom that we have against our target. Maybe even the whole of it. However, let's be sure, we are looking at the gearing currently at a situation where, of course, IFRS 16 distorts this number a little bit. We said that we have an impact of 4%-5% just from the IFRS 16. This is not something that we would measure ourself again in 2019, if it comes to the headroom that we have left for our acquisitions.
Regards to what exactly the level will be, let's be surprised when we will be able to give you good news on the transactions going forward.
Michele, on Nord Stream 2. First of all, I have to say we are within time and plan with the project. Which says also within budget. We have now financed, including the Q1 contribution, EUR 640 million as OMV share. The project, now I think I work a little bit on the progress because you read so many numbers, how many kilometers are already constructed. Right now, 1,100 kilometers of the pipeline of the two lines are constructed. As we are building two lines, each around 1,200 and let's say 50 kilometers. Is a bit less. 1,250. In total, 2,500 kilometers of Nord Stream 2, two lines have to be built. Given that we have now built 1,100, something between 40%-45% of the pipeline has been laid already. We have moved now our laying activities into Russian waters.
We are going to construct in the next week around 100 kilometers in the Russian sector and connecting especially with the injecting point in Vyborg, so that we are going to have the first section more or less in place. The main topic on our agenda as we speak about what do we need to finalize the project is the remaining permit from Denmark. As you have seen in the press, Nord Stream 2 AG has applied the environmental or delivered the environmental impact assessment study for a third line. We have now three lines to be discussed or three routes to be discussed with the Danish authorities.
I'm now calling for a quick decision from the Danish authorities. They know the project since an eternity already. On a non-discriminatory basis, I expect to see that decision coming as early as possible so that we do know which laying barge we have to send where, so that we can connect the two pieces of the pipe. As we speak about the Third Energy Package with the amendments, we have to wait and see how this is going to be implemented into German law. I can give you an idea what kind of impact this will have on the project.
Thank you.
Next question is from Peter Low, Redburn.
Hi. Thanks for taking my questions. Your organic free cash flow generation has been very strong over the past couple of years, but that's been somewhat masked by significant inorganic spend. We're now coming to the end of those acquisitions. How do you think about the use of that free cash flow going forward? I'm thinking come from a longer term perspective. Secondly, just on commodity hedging, can you confirm whether you have any hedges in place for either oil or gas volumes this year?
Regarding your first question regarding the free cash flow use, we have given a set of new priorities, actually, in the use of our proceeds from our business. Of course, everything which is, I would say the organic investments, everything that is mandatory and maintenance stays priority number 1 in order to keep the quality and integrity of all our operations and assets. We have moved up to priority number 2, the payments and dividends. Why is that? Because we want to be heard very loud and clear about our dividend policy, that is a progressive dividend policy where our aim is to increase dividend year by year, or at least keep it at the level of the past year. Priority number 3, is deleveraging.
As I have mentioned in my last comment about gearing, you can see that, of course, it will be our target for the near term to regain a headroom again after successful acquisitions. Therefore, this is priority number 3. Priority number 4 is the continuation of growth. It's only a priority number 4 because we said actually on big transactions, we would take a pause for now as we have a lot to consolidate and bring to the levels of our operational aspirations. We have been very successful in very short term about these acquisitions. That's the use of the free cash flow that we will be producing over the next year. Your second question was about hedges, and yes, I can confirm that there are no commodity hedges for oil or gas in place on our upstream side.
We have more or less dissolved a hedge on the gas side in January, and therefore, today, no hedges in place.
Great. Thank you very much.
Next question is from Henri Patricot, UBS.
Yes, hello, everyone. Thank you for the update. I have two questions, please. The first one is on the tax rate and guidance for the full year 2019, whether the guidance for on 40% still holds and whether we should expect a bit of a spike in the second quarter as you sell more from Libya, then slightly lower in the second half of the year, assuming stable macro environment. Secondly, I was wondering if you can give us an update on your discussions in Romania regarding the regulatory environment, and what it means for possible FID of an opportunity. Thank you.
Henri, regarding the tax rate, yes, I can confirm that we keep our guidance on the 40% for the full year up. It is right that our tax rate, of course, has been more beneficial in the first quarter as we did not have any kind of listings in Libya. As we will catch up, at least for the production volumes for almost one month from Q1 in Q2, we can expect the tax rate will be slightly higher in that area and then will be on normal levels, which we estimate to be around 40% for the rest of the year. Well, on Romania, our local Petrom management is in a very intensive and deep dialogue with the Romanian government, with different ministries. We are definitely seeing a little bit of progress.
We remember the gas cap for the next three years has been reduced as an impact to the market, limited to a lower market segment. I would say that's all positive news I can give you, Henri. Sorry to say. Because it's only this, it's not enough to go for a positive FID. We need to have further fiscal stability, especially a clear commitment of the Romanian government to a liberalized market. Of course, we also need the key infrastructure in place.
I know that the tender for the BRUA pipeline will expire end of this month. Therefore, I hope we will have more clarity. If not, there has to be a further prolongation of the tender for these capacities. It takes two to tango. We have a partner, Exxon, who also has to say yes, we are fully aligned in such a partnership. Right now the regulatory framework and the fiscal framework we see on the table is not sufficient to initiate or to start our approval process internally. Your question, when it will be, this is a crystal ball which is pretty foggy at the moment. Yeah. It all depends not on us, it depends really on the Romanian government to come up with a satisfying framework for us.
Understood. Thank you.
The next question is Yuri Koktanich, Deutsche Bank.
Yes. Thank you. Well, first of all, gentlemen, congratulations on the results. I think they're excellent given the environment in Q1. I've got two questions. One, around your production. We had some issues in Aasta Hansteen. There was a pipeline leakage, production was shut there. If you could just update us on the current situation. Also in Romania, it seems like production decline is accelerating in the past two quarters. I was just wondering how are you fitting these two events into your 2019 average production guidance of 500,000 barrels per day? That would be my first question. The second one, it's a little bit more abstract, about Gazprom senior management departures. If you could just comment whether these departures in the beginning of the year in any way impact the timing or potential timing of the Achimov deal or any other of your activities in Russia.
Thank you.
Well, Yuri, as we speak about the production in Romania, you are absolutely right that we are now estimating a higher decline rate. Given the unfavorable changes of the framework of the Romanian government, especially the gas price cap, the decline rate, which we formerly guided with 3% per annum, we are now expecting a 5% decline rate per annum. This is one of the consequences we have to swallow because we have reduced our CapEx program. We had to reduce our CapEx program in Romania because some of the gas projects, given the new regulatory framework, did not calculate a positive rate of return for us. That's the reason why Petrom management decided to reduce the CapEx program for 2019. That's why you do see a higher decline rate in Petrom than we have guided in the past. The second question on Gazprom management.
Well, I do regret, of course, that Alexander Ivanovich Medvedev has left the board for whatever reason, but he was replaced by Elena Burmistrova, which I know since an eternity because she was running Gazprom Export, and as you know, we have done really very progressive activities together with Gazprom Export. We prolonged our gas contracts with her. We increased our volumes with her. We have done some separate good transactions. We are very much used to, and now I have to talk to her. Is this in any way delaying our agreement on Achimov 45? Let me say, the risk is there. I agree with you, Yuri, because Elena was not involved when we negotiated Achimov 45 with Alexander.
This transaction has a priority, and of course, she needs some time to get familiar with that, but I do expect that we are going to find each other on the final terms on the purchase price during the summer. The summer goes until September, from my point of view. That's a late summer because I was born in September, and I see myself that I'm a late summer boy. That's why I think, to be fair, yes, potential risk is there, but let's wait and see. I'm a little bit relaxed, Yuri, honestly speaking, because the NPV or the value of the asset is really changing in the negotiations the day we are going to see the first production, and this is anticipated in 2021, and therefore I do have two years left, which I don't want to use.
I hope it's only until latest end of summer this year.
That's great, Rainer. Thank you so much for the comprehensive answer. If you could just comment very briefly for Aasta Hansteen as well. Thank you. Okay.
Yuri, on Aasta Hansteen, you are right. There has been a short shutting in order to repair a leakage of a valve, which is actually not a total unusual thing if you have a new startup, that these things will have to be fixed over the time. I can confirm that Aasta Hansteen has been brought up again and is producing.
That's great. Gentlemen, thank you so much.
Next question is from Alvin Thomas, Exane BNP Paribas.
Hi, good afternoon, team. I just wanted to ask just on production going into the summer months and into 2Q, outside of Libya returning. Can you maybe just discuss some of the moving parts there, and particularly on the Russian gas volumes, what are you expecting there given weaker gas prices in Europe? Whether there might be more than the usual sort of seasonal impact there. Secondly, last quick question. Is the EUR 140 million impact from Libya for the quarter generally a good benchmark for future quarters? Thanks.
Well, I take your second question because I have to work a little bit on your first one. The EUR 140 million is not a benchmark for the next quarters. It really depends how much liftings we are going to see in Libya, and that's determining the impact. Yeah? All I have said is that a little bit of the Q1 is now moving into Q2. Yeah? That's all I can give you as a guidance, which tells you in Q2, it must be at least EUR 145.
Okay.
Instead of 144, which we have seen in the Q1. All right. In what we see, your question on the gas volumes in Russia, we have normal seasonal impact in summer, and annual maintenance in the third quarter. That's the reason why we are going to see a lower production level in Yuzhno Russkoye in the summer quarters. This is a typical profile we have every year. Yeah? That's also why we are guiding the 100,000 barrels per day in average for the total year. If we see it's a little bit more in the winter quarters, Q1 and Q4, and a little bit less in the summer quarters, that's a normal profile. By the way, fully in line with the consumption in the market. Yeah? You don't do me the favor to heat your house in summer.
I would supply the gas to you, but you don't want it, and that's the reason why we have such a profile.
Okay. Just to be clear, you don't expect any specific impact just because gas prices in Europe have been weaker?
No.
Okay, thanks.
Next question is Christopher Kuplent from Bank of America Merrill Lynch.
Thanks. I've got a few crumbs left, so hopefully they'll be quick. Firstly, two on IFRS 16. You're indicating on your slide there is a positive impact on free cash flow and on CapEx. Can I add the two numbers up to get to an impact on operating cash flow? That was the question number one. Secondly, the decline in unit OPEX in the first quarter, can you confirm whether or not that is in fact IFRS 16 related? I would expect somewhere OPEX goes down if depreciation is going up. That would be helpful. If I may, one more question on the borrowing out of dividend that you highlighted being split into two payments. Is it a 50/50 split? Do you already know how much is coming back to you in the third quarter? Thank you.
First coming to your questions about IFRS 16. The impact on IFRS 16 is actually one where CapEx goes up. The reasons for CapEx going up is that, of course, there are always some of these lease contracts going out and some coming in. Of course, you have to then see that the level of the overall net debt, where we said it's around EUR 700 that we did by more or less 1st of January, is coming up. Part of that will then go down again. A little bit more will come up in CapEx. You cannot add up the full number of CapEx to a free cash flow impact. Whereas, of course, the free cash flow is a positive one.
We said it's EUR 85 million for the full year. That more or less comes in from the EUR 90 million that we see on the operative site as the differential, plus a very small negative impact on net profit of five. That's more or less the differential that you have here. In general, you would see, of course, OPEX going down a little bit. You also have to take into account, it's not only depreciation that you have. You also have some interest. Therefore, you see while there's a small positive impact on the operational result, there's a small negative impact on the net result. That difference is more or less the interest part. On the Borealis dividend, no, that's not necessarily the case that we have a 50/50 between the first and the third quarter.
This very much depends also on the operational performance and the investment plans of Borealis. Therefore, we are guiding only on what we have seen for Q1, but there is, of course, something to be expected in Q3.
Thank you, Reinhard. If I may, can you confirm or not, whether the unit OPEX decline in Q1 is not a function of IFRS 16?
Yes, I can confirm that. It's not a function of IFRS 16.
Good. The next question is from Oleg Galbur, Raiffeisen Centrobank.
Yes, good afternoon. I have two short questions. The first one on the upstream production. In Emirates, you recorded a level of 22,000 barrels a day. If I remember correctly, I might be wrong, the level guided for this year was 30,000 barrels. If that's the case, could you tell us when do you expect to reach this level? The second one is on depreciation. Is the level of 560 million EUR reached in the first quarter a good indication for the remaining quarters? Thank you.
Let me start with the second question. I think it's very fair to say that there is, on the depreciation side, with the acquisitions and the additions in capital employed that we had, a good indication for this level to continue for the rest of the year. Of course, if there are further acquisitions and further additions on our capital employed, there will also be additions on the depreciation. Your question, Oleg, on the United Arab Emirates, we can't give you an indication for 2019. All we have said so far is that we expecting to see the plateau production, which will be 43,000 barrels per day in 2023. We will have a step up in the production. The years in between, we are not giving any guidance.
Understood. Thank you very much.
We have a follow-up question from Thomas Adolff, Credit Suisse.
Thanks for taking my follow-up question. I just wanted to go back to your comment on Achimov. You've just mentioned on the call that you expect production to start in 2021. When I go through the transcript from the full Q results call, you've mentioned production is estimated to start at the end of 2020. My question, I guess, is there a delay on Achimov or have you just simply rounded it down to 2021? Thank you.
All right. Well, Thomas, we can discuss whether it's 31st of December or 1st of January. I don't do that. We don't see any delay in the project. Yeah. We just have said, okay, come on. There can be a swing into the first quarter of 2021. That's why I am more on the safe side. Yeah. Given the fact that I'm negotiating Achimov four, five, you might understand that I see it in the negotiation more in 2021 than in 2020.
Okay. Thank you.
Next question is from Bertrand Hodee, Kepler Cheuvreux.
Yes. Hello, everyone. A follow-up question on Chris' question on IFRS 16 impact. You've disclosed a lot of impact from IFRS 16 free cash flow CapEx, but you did not disclose the impact on the operating cash flow, and there must be one. Can you give us that number for the full year? Can you disclose, if you have that in mind, if there was any positive IFRS 16 impact on your EUR 1.2 billion operating cash flow in Q1? Thank you very much.
Actually, the number that we have given for the free cash flow is the same as for the operating cash flow. There are no deduction in between, the impact that we are seeing actually is the same EUR 85 million that I've given you before as impact on the free cash flow. That's more or less the impact that we are seeing, and that's more or less a ratio that you see compared to what we have on the first quarter impact that we are seeing at the moment.
Okay.
On the CapEx, we have said it's around EUR 150 million. That will be in addition. As Reinhard said in his speech, the CapEx is included in our guidance of the EUR 2.3 billion operating CapEx of this year.
Okay.
Good. Thank you all for joining us today. This brings us to the end of our conference call. Should you have any further questions, please contact the investor relations team. We will be happy to help you. Have a good day, and goodbye.