埃尼石油 (E) 2003 Q2 法說會逐字稿

Good afternoon ladies and gentlemen. Welcome to ENI 2003 second quarter results and half-year presentation chaired by Mr Vittorio Mincato. You will remain on listen only until the question and answer session begins. Anyone who requires any assistance while you are on the conference call, please key *0 and a coordinator will be happy to assist. Thank you. Over to you Mr Vittorio.

Ladies and gentlemen good afternoon. Thank you for attending the conference call presenting 2003 first-half results and the business [range].

Reporting net income of around EUR3.1b with an increase of around 37% compared to [inaudible] first half net profit. This result was achievable mainly thanks to double digit growth in the operating profits of around EUR500m. A result of a favorable market scenario, increase in production, higher natural gas sales and strong recovery of the refining business. Accounting for more than EUR200m, extraordinary income related to the final settlement of the litigation of Edison. Net tax benefits of around EUR290m relate to the evaluation [indiscernible] of to Stoccaggi Gas Italia in 2001. Lower minorities as a consequence of the Italgas [indiscernible]. These positive effects were partially offset by higher taxes for around EUR120m, mainly as a consequence of higher taxable income.

In the first half of 2003 [clean] net income amounted to EUR2.85b, with an increase of 15% versus the same period of 2002. The aforementioned growth in the operating costs was supported by the market scenario, which, for the period, was more favorable than the previous year. Also showing a slight reduction, if you will compare the second quarter with the first one in particular.

The average [boe] price reached between $8.08 dollars a barrel, which is 5% increase, compared to the corresponding period of 2002. The refining margin of Brent was £2.99 boe, increase compared with the $2.11 in the first half of 2002 owing to [full] $7 boe. However, these positive effects were partially offset by the strong appreciation of the EURO versus the US dollar [indiscernible] at 23%.

Reported as adjusted EPS, based on an average number of share of EUR3.78b, increased by 39% and 17% [that we see] over the same period 2002. The return on cash flow per share, we see an increase [10%], 7% on the reported basis, as adjusted basis, compared to the corresponding period of 2002.

[indiscernible] production compared with the second quarter 2003. We have fully recovered the negative affect related to the Venezuela strike, which happened at the beginning of the year. Today, hydrocarbon production, second quarter 2003, reached [1,000,566] boe, up 6% versus the corresponding period in 2002. [indiscernible] the increase of 4% reached in the first quarter. The main contribution comes from the consolidation of Forcum, the increased production achieved in Nigeria, production and of the field start up in Australia [indiscernible] [Pakistan] [indiscernible] and [indiscernible] [indiscernible] the group. These positive effects were partially offset by lower production in [Angola] and the decline of the mature fields in [Europe].

In the first half, hydrocarbon production reached 1,000,527 boe per day, up 4.9% verses 2002 results. If we add the effects of Venuzuela, hydrocarbon production for the first half 2003 is up 6.1% on the corresponding period of 2002. Overall, we are confident to reach production levels of more than 1.6m boe by the end of this year. Our results are in line with line with the target to reach more than 1.8m boe per day in 2006.

Regarding gas and power business. Gas volumes sold rose by 14% in the first half 2003. In particular, sales in [Italy] [decreased] by 1.5% as a result of lower sales to [Europe]. Poor sales partially offset by higher volumes sold to [indiscernible]. Our sales relate to residential and commercial. [indiscernible] and [consolidated] sales reached 9.3pcm with a 39.6% increase on a like-to-like basis. Other [international] gas sales of 3.6pcm are mainly related to the [indiscernible] [indiscernible] contribution on this quarter. This trend is fully consistent with our growth [indiscernible] [indiscernible].

Let me now spend a few words about [indiscernible]. As you know, gas flow has been suspended on the [March 10, 2003]. From tomorrow we restart again with supply of gas [indiscernible], having a delivery target of 2003 of around 0.8pcm, of which 0.4pcm will be realized [indiscernible]. We see an important [trend] set before the future development of the project. Also, the commercial appreciation between gas flow and production and [indiscernible] gas prices. It is still going on. In this respect we understand that the both parties are conducting a merger discussion with possible solution.

This focusing on [indiscernible] on gas suspension, I would like to update you on our recent deal with Union Fenosa. On July 24, 2003, we closed the acquisition of the 50% stake in Union Fenosa Gas. With a cash out of EUR441m, fully in line with the agreement signed last December. The deal was finalized on March 13 and has received, in the last month, the approval of both the Spanish Government and the European [indiscernible] Authority. We have formed a strategic partnership, which will contribute leveraging on our commercial management team [indiscernible]. As you know, European Union Fenosa Gas operate around the whole gas [chain] and the recent acquisition has totally strengthened our competitive position in [European] markets but also allows Eni to enlarge and diversify in the gas petroleum supply to the [Nicaranian] [basin]. In particular, [indiscernible] [plant] we play important role in contributing to a faster [indiscernible] ENI gas [indiscernible] [indiscernible].

Finally, with reference to the gas and power business. Let me give you an update of the development of our power [indiscernible] to date. We have a fourth plant under construction, located at Ferrera Erbognone, Ravenna, Mantova and [Brindisi] have an overall capacity of 3.8 GW. To reach the goal the first [indiscernible] of [indiscernible] providing the 1 GW of the combined cycle and electric [storage] capacity of the plant located in Ferrera Erbognone. To start producing electricity which was then transferred to the Italian national electricity grid in order to cover peak power demands of [indiscernible] [indiscernible]. Plants will be completely on stream for commercial activity 2004. [Plans] for one location in Ravenna, perfectly on track with our plans.

Let me now update you on one of the key strategic lines of ENI 2003 [2006]. The reduction of our capital growth of [indiscernible] core business, specifically the petrochemical business. As of the end 2002, the large installation [received] the approval [petrochemical] business. In [indiscernible] [indiscernible] [indiscernible] chemical player direct development of natural [indiscernible] conveyed their interest in some specific [indiscernible]. [indiscernible] [indiscernible] expected to reconsider that another big capital player [indiscernible] [indiscernible] plans for international business [indiscernible] [indiscernible] due to the [indiscernible] [indiscernible] trend in the chemical market scenario. [indiscernible] [indiscernible] business has reached the final stage of [indiscernible] [indiscernible] confirmed [five] [others]. The Ravenna [indiscernible] plant started has been driven [indiscernible] [indiscernible] start of the [indiscernible] for sale of the [indiscernible]. [indiscernible] laid down at Huston, [Texas]. High [indiscernible]. First, [indiscernible] for the [indiscernible] profit in another plant and five [indiscernible]

[indiscernible] [indiscernible] plans to integrate the Ravenna. [indiscernible] these later plans due to the disappointment in other results over the past year. Results that have, by now, [indiscernible] [indiscernible] [indiscernible] [indiscernible] to immediately implement plans for efficiency recovery in production [indiscernible] aim is to provide [indiscernible] [indiscernible] ability over time. This will involve [indiscernible] industrial and organizational for the whole. I’d like to [indiscernible] that at the close of [indiscernible] plant [indiscernible] [indiscernible] [indiscernible] [indiscernible] have been shutdown for the past two days.

To concludes my presentation, let me comment on the net debt and [indiscernible]. The debt in 2003 amounted to EUR12.8b, EUR1.1b higher in comparison to 2002. We are in the figure [indiscernible] of the financial sector for the first quarter 2003 of around EUR3.6b [indiscernible] for requisition the last quarter. EUR2.8b cash out for the business segment at the end of June. Cash flow was partially offset by the strong cash generated by operating activities, more than EUR8b. As a consequence, our debt to equity ratio increases to 0.48, compared to 0.39 of [year-end] 2002. [indiscernible] below the 0.5 target set in our strategic plan.

Thank you for listening and now I hand you over to Marcos, who will analyze first half results [indiscernible].

Thank you Vittorio. Good afternoon ladies and gentlemen. After the introduction on the main trends in the first half 2003, I will now talk on the economics. Before commencing with the first half figures, as usual, I’d like to remind you that any results are affected by several factors, including the seasonality in demand for natural gas and for petroleum products in industry and residential heating. Demand a week is higher first quarter of the year, which includes the coldest months, and lowest in third quarter, which includes the warmest months. Therefore, any operating income and change in that [debt] for the first six months cannot be extrapolated for the full year.

[inaudible] debt. As far as the main operating data is concerned, the first half of the year showed a growth in [indiscernible] volumes sold and well as increase of almost EUR2b [indiscernible] in overall sales in the natural gas. Hydrocarbon production sold increased by 4.4% as a result of increased sales abroad, mainly [cash].

[R&M] the volumes sold showed a decrease of 5% in the first half. This reduction was mainly due to lower sales of fixed cost as well as lower sales to other [owned] companies. This was partially compensated by the increasing volumes sold in the retail market of Europe, and by higher volumes sold in the main network in Italy.

[Leverage] on positive energy scenario, already commented by Vittorio, and the just mentioned operating data, the first half of 2003 operating income, excluding EUR282m of non-recurring items, totaled EUR5.4b. An increase of 17% with respect to 2002. That result has been achieved thanks to an increase of 24% and 7.5% in the first and in the second quarter respectively.

Reported operating profit in the first half of 2003 totaled around EUR5.1b. An increase of about 12%, in comparison with the corresponding period of the previous year where it was EUR4,175m. Second quarter reported operating income, including EUR452m non-recurring items [indiscernible] the [indiscernible] chemical businesses, amounted to around EUR1.8b with [indiscernible] 5% decrease versus the corresponding period of 2002.

In the first half 2003, E&P [clean] operating income amounted to EUR3,039m, with an increase of 18% over the same period of 2002. This result is mainly related to higher realization prices in [denominated] in US dollars following the [indiscernible] oil market environment. The 4.4% of growth in hydrocarbon production sold, in particular [natural] gas, which accounted for around EUR87m. These positive elements were partially offset by the 23% appreciation of the Euro over the US dollar, and the lower contribution coming from storage activity due to the new storage at [indiscernible]. If we add back the [position] of the Euro versus the dollar, EUR453m the first half of 2003 the increase in E&P [clean] operating income on 2002 would be in the range of 36%

Second quarter [clean] operating income amounted to EUR1,274m, in line with the corresponding period of 2002. The strong increase of realization prices and the higher hydrocarbon production sold, was almost totally offset by the 24% appreciation of the Euro over the dollar.

Non-recurring items in the [E&P] sector accounted for EUR129m. Of which, EUR30m in the first quarter and EUR99m in the second quarter. All related to asset writedowns for [indiscernible][Pakistan] and [ceiling] [tests] in the UK. Including non-recurring items, reported operating income totaled EUR2,910m, a 15.7% increase versus the first half of 2002.

As far as the gas and power business is concerned. [Clean] operating income reached EUR2071m in the first half 2003, with a 3.7% increase compared to the results achieved in 2002. This increase is due to higher margins in primary distribution, [thanks] to the positive impact of the Euro appreciation on the average purchase price our [indiscernible] but offset the structural changes such as [indiscernible] with [indiscernible] and higher gas sales at [border] occurred in [inaudible] and the higher volumes sold across Europe.

These positive factors were partially offset by the goodwill amortization relevant to the [Italgas] deal, about EUR45m, and lower margins in the power generation due to the planned maintenance [indiscernible] in our plant in [indiscernible]. Second quarter operating income, before non-recurring items, amounted to EUR542m, with a 5.2% decrease compared to the EUR572m accounted in the corresponding year of 2002. The decrease is related to lower margins in the primary distribution due to the effects of [indiscernible] [indiscernible] partially offset by higher volumes sold. Goodwill amortization relevant to the [Italgas] deal and finally the lower contribution of the [Powergen]. These negative effects were partially compensated by higher volumes sold in the primary distribution.

Let’s now turn to the R&M segment. Operating income, before non-recurring items, amounted to EUR325m with an increase of more than 160%. The recent sharp increase over the corresponding period of last year is determined by the strong improvement of refining markets [indiscernible] 2.5 dollars per barrel and marketing markets as well. Also, higher savings related to the streamlining process as a development on the [Peruruo] refinery, and higher volumes sold in Italy on the main network also, thanks to the new product BluDiesel. The positive market environment in the refinery activity in the first half was partially [diffused] by the stronger position of the Euro over the dollar, lower profitability of the [GPL] sales in [Brazil].

In the second quarter [clean] operating income totaled EUR280m, a 241% increase versus the 2002 results, thanks to still high, although decreasing in comparison to the first quarter 2003, refining market and the still positive contribution of the distribution activity. The results also benefited from the recovery of processing in those refineries and the maintenance in the first quarter. These positive effects were, once again, partially compensated by the appreciation of the Euro over the dollar.

The first half 2003 petrochemical clean operating income reached the EUR55m. An important result if compared to operating loss of EUR65m accounted for in the correspondent year of last year. This result was achieved thanks to the recovery in unit [margins], mainly due to lower costs of the [indiscernible], and the higher paid price. This positive effects were partially compensated by lower volumes sold, mainly in the [indiscernible].

On our [reported] business. The first half of 2003 operating income reversed to an operating loss of EUR51m, due to the EUR83m [indiscernible] [indiscernible] and EUR23m related to [inventories] right now, both made during the second quarter 2003.

The oilfield services and engineering operating income, before non-recurring items, amounted to 139m, a 12.53% decrease if compared to the first half of 2002. A EUR20m reduction was mainly related to the EUR37m reduction of the operating income off-site and due to the end of the [indiscernible] project and to the increased weight of the contract. These negative effects were in part offset by the positive contribution of the former [indiscernible] [indiscernible] now [indiscernible].

The second quarter of 2003 showed an 80% increase over same period of 2002, mainly thanks to a better operating result [off-site]. The [indiscernible] and continuing operating loss, before non-recurring items, in other activities. This is mainly related to EUR130m negative result of [Senial].

In the first half 2003, the operating profit line net financial expenses amounted to EUR40m, with a sharp decline if compared to EUR81m in 2002 due to lower interests in the financial market and the impact of the appreciation of the Euro financial charges relevant to debt in [indiscernible] US dollars. Partially offset by the higher amount of the [average] effect.

Net income from investment amounted to EUR80m, as compared to EUR50m in first half 2002. Increase is mainly due to lower loss related to [indiscernible]. The [indiscernible] EUR4m loss. Higher income on investment accounted for with the equity mix of [indiscernible] gas and power, R&M and oilfield services. Finally, EUR29m gains on this quarter of assets in the petrochemical business.

Net extraordinary income amounted to EUR155m, as compared EUR93m net extraordinary charges in the first half of 2002. This item is mainly related to the final settlement of the litigation with Edison and gains from this quarter in R&M. These positive factors were partially offset by provision for environment [indiscernible] and continuance in [indiscernible] R&M and [indiscernible] incentives for EUR22m.

Income taxes increased by EUR118m, with respect to the first half 2002, due to higher taxable income and the expiry of fiscal benefits for new investment in Italy provided [indiscernible] income tax. These negative effects were partially compensated by first; the deferred taxes for Stoccaggi Gas Italia. A financial deal for the year 2002 allows the step up the tax paid off the assets, which has been [literally] spun-off to Stoccaggi Gas Italia’s partner [indiscernible] [indiscernible]. A 9% tax was due on the difference between the tax paid off the assets contributed and [indiscernible]. As a consequence a net amount of EUR287m has been [booked] at deferred tax. Second, was the fact that the last year we had an adjustment of the return for the first tax liability due to the change in the tax regime in the UK, with a negative impact of EUR216m. Finally, when the two-percentage point reduction in the corporate income tax [indiscernible] from 36% in 2002 to 34% in 2003.

Finally, the minorities were reduced by EUR91m due to the Intalgas deal, which allows to [count]the related distribution to Intalgas shareholders of their share of the company result.

In the slide number 20, you can see how we moved from reported net income to adjusted net income for the semi-annual period. [Clean] of non-recuring items, the net income reached around EUR2.85b, with a 15% increase over the same period 2002. During the first month of 2003 any result would have taken, first of all by negative operating non-recurring items for around EUR280m related to assets writedowns and ceiling tests in the [E&P] as well as impairment testing for the [indiscernible]. These factors were more than offset by the already commented EUR155m extraordinary income, the EUR287m deferred taxes Stoccaggi Gas Italia and, finally, by other tax items – mainly related to the release of the deferred taxes accrued for [advance] amortization net of the taxes [paid].

As far as Investments are concerned. Ithe first half 2003 any capital expenditure amounted to around EUR4b, of which around EUR2.8b invested in E&P and around EUR1,000m in and gas and power. Confirming our strong financial efforts to sustain the growth in the core [build]. This amount of CapEx represents a 15% increase versus the same period of last year. In addition, around EUR3.3b were spent in [indiscernible] investments, related to the Intalgas and [indiscernible] acquisition.

As for shares, the buy-back program is confirmed. The total cash out from January to the end of June 2003 amounted to [EUR260m]. From the start of the program and up to the end of June 2003 we bought back 225m shares, the equivalent of 5.6% of the share capital. The average price paid is EUR13.74 per share.

Finally, as Vitorillo has already anticipated, net debt into June 30, 2003, amounted to around EUR12.8b. EUR1.62 higher if compared to 2002 [year-end] figures. This is a significant result if you consider the strong cash requirement we paid in relation to CapEx, the equity investments and to payment of [indiscernible].

Thank you for listening. I must apologize because at the beginning of my speech I forgot to mention that here with us are also the Heads of the Operating Divisions and now we all are pleased to answer any questions you may have.

Thank you. Ladies and gentlemen your question and answer session will now begin. If you wish to ask a question, please key *1 now.

Operator, we have some problems with the line. You’re words are being cut off. We can just hear half of what you say. If the same applies to the Q&A session it wont be easier to answer.

Is that coming any clearer?

That’s better. Thank you.

I will start that again for the benefit of people who didn’t hear. Ladies and gentlemen, your question and answer session will now begin. If you wish to ask a question, please press *1. If you change your mind and decide with withdraw that question, please key *2. Your first question from the line of Doug Leggate.

Thank you. Good afternoon gentlemen. I’d like to ask two questions, if I may. The first one tax charge. When we strip the exceptional items, we are getting a [pre-tax] charge of 46%. I wonder if that is in line with your own estimates and if you could confirm the outlook for your full year tax [charge] in 2003. That would be very helpful. Second question is capital expenditure. You’ve made this very clear in the past that your EUR23b CapEx budget for the period 2003 – 2006 is for [design] projects. Obviously there has been some discussion over how both your actual CapEx could look like before that starts for the interiors. I just wondered if you would be prepared to give us some updated guidance on both the CapEx for this year, 2003, and also for that full year period please. Thank you.

If I begin with the first question regarding tax charge of about 46%. If we did not consider [indiscernible] extraordinary tax items, you are right but you [don’t] say that it is [indiscernible] [indiscernible] to consider that [indiscernible] as if it could be applied at the year-end. As regards out best estimates, I think that we could remain in the range of 41%. We always mention something between 40% and [42%] could be the order of magnitude still [indiscernible] for 2003.

As regards CapEx, first the issue about 2003. We expect to be in the range of EUR8.8b and that’s what we still expect to spend at the year-end. As regards to [indiscernible], you’re right. During the last [indiscernible] we put evidence the fact that we take into consideration gas [indiscernible] projects and the nature of the things is that now some more projects have been defined versus the situation we were in February. Well having confirmed that 2003 figure, we would prefer to elaborate on when the new full [blend] will be presented to the community. Then only it would make sense, because it would be as part of a wider [speech].

Okay gentlemen. Thank you very much.

Thank you. Your next question comes from the line of Mr Rod McLean

Good afternoon everybody. Two questions please. On accounts in power, you now a full half-years worth of history in terms of performance this year. Can you just give us your latest guidance for operating income for the full-year please? We know what you said at the time of Q1. Has there been any changes to that? The second one is some reports [indiscernible] question. Can you just tell us what the contribution from the power business was in the second quarter?

Yes. This is Stefano speaking. Good afternoon to everybody. We can confirm what we anticipated after the first quarter that a reduction of EUR150m expected for full-year. This is based only on the structural reduction, mainly on the new plant that has been running this year, last year. However, this reduction will be offset with higher sales. This was due to the weather effect and also by positive scenario that happened with [indiscernible] specifically, for the appreciation Euro against the US dollar. A [indiscernible] question. Powergen activity contributed with EUR8m. I would like you to remember that last year the contribution was EUR31m. This is about a 0.5% of the total division of operating profits. The reason why this reduction compared with last year, is due to the plant at [indiscernible] has been shut for [90 days]. This is the main reason of this reduction of contribution.

Thank you very much.

Thank you. Your next question comes from the line of Miss Caroline Cook. Go ahead.

Good afternoon gentlemen. I’ve got couple of questions if I can. First of all a financial one. Can I just confirm that again on the tax rate 46% for this quarter, 41% for the year? Is that right? Can you give us any more detail on why the tax particularly high in the second quarter. Second issue is quite a large reduction in equity at the end of this quarter, about EUR2b from the end of March. I just wondered if you could clarify that again. Finally, just an operational issue. We’re seeing on Roiters comments that Mr Mincato would like to see production of 2m barrels a day before he retires. I wondered if maybe if we could get that expanded on, either in terms of the retirement date or possible incremental organic growth. Thank you.

Caroline, I’ll begin and then maybe I’ll ask you to better [indiscernible] the second portion of your question because I didn’t get it entirely. As regards the tax rate. It’s correct that if we had the back [indiscernible] extraordinary component we had in the first part of the year, the fiscal, the tax rate would be 46% as Doug said. The reason is that it is simply not prepared to measure the fiscal impact over a [interim] period. For instance, we have a kind of carry over from last year fiscal [indiscernible], which is considering tax. Reduced period of time is [indiscernible]. At the year-end we are projecting again in the range of 41% 42%. The range will always be between 40% and 42%. We can speak to that order of magnitude.

So if I wanted to look at underlying operational performance for this quarter, I could still apply at 41% tax rate?

Yes.

Thank you.

Thank you. And your next question comes from the line of Edward Westvick.

I think there was a question relevant. I think you were making reference to something which Mr Mincato said during the press conference about his retirement. He tells me that it is a dream so I think it wouldn’t be, from an analyst point of view, totally [correct] to try to figure our a [production] target with a day and the month on which Mr Mincato will retire.

The reduction rate is substantially represented by something like EUR1b as exchange rate differs. Sorry I didn’t get that first time. Next.

Thank you sir. Sorry about that. Your next question comes from the Mr Edward Westick.

Just a very quick question on buy-back. Obviously your net debts, or debt ratio are getting closer to your ceiling. Do you think that you will continue that buy-back program up to [indiscernible] shares [indiscernible]?

For the time being, yes. At the same time saying that we always said that we would consider the [indiscernible]of many of the [indiscernible] yearly basis. A kind of flexibility element in the management of the liability side of the balance sheet. But definitely we’re still committed to go ahead with the buy-back program. Next.

The next question from Mr Alastair Sym.

Hi. I just wanted to ask two quick things. One about disposals of [indiscernible] income through in the second half of the year. What should be [indiscernible] that figure to that cash flow. Secondly, a question about buy-backs. Just seeking confirmation that you wont look to cancel share [indiscernible] contained in the [indiscernible] in the potential currency if you need them.

As regards [indiscernible]. I think it would be inappropriate to you give you a guidance on what we expect to receive in this quarter. [indiscernible] major contribution is expected to come from the Upstream division and negotiation are still on and so I think it wouldn’t be [indiscernible] beginning in these [indiscernible] in terms of the assets which we have put on the market. Yes, we expect to have a component in our cash flow [deriving] from disposal of some assets. It’s too early to give guidance on that amount. As regards to buy-back. I think that if it is correct that for reasons, which we commented on several occasions, it would be very difficult from an [Italian] [indiscernible] point of view to cancel shares and so we are not planning to do that. It’s fair to say that we never said that we would have used them as a currency for any exercise and [indiscernible] the site. In fact the resolution adopted by ENI General Meeting which [indiscernible] the buy—back program clearly stated that the management is not entitled to do anything with those shares but keeping them in [treasury].

We should go back to the ENI General Meeting and ask it’s consent to use those shares for any purpose, as we’re doing for instance for the stock [indiscernible] and stock option plan. `

I guess you’re using [378] to you average number of shares for the first half, it would be reasonable to consider then that the shares are effectively cancelled.

Well no. We’ll have to see if the situation of the Italian civil codes which imposes, let me say, a complicated path to be followed in order to actually cancel shares with [indiscernible]. For the time being for a company of this size at the complexity of ENI we think, and we make some investigations to that respect, it would be almost impossible to cancel shares. You would need the consent of all the [creditors] it’s rather complicated.

Okay. Thank you very much.

Your welcome.

Your next question from the line of Nora Finardi.

Good evening gentlemen. [indiscernible] provide some more explanation on the asset [writedown] down that [indiscernible] E&P profitability and petrochemicals. Thank you.

This is Stefano Cao. For answer to writedowns. In Upstream, they are related to the [indiscernible] of [indiscernible] approved [mineral]. In particular main one in [indiscernible] in Pakiston which we acquired last month acquisition and we then [indiscernible] and realized that [indiscernible] the target we [indiscernible] and our [indiscernible] we have [indiscernible]. This is about EUR70m. In terms of other acquisitions they also refer to number of minor assets in UK as part of part of the continuous process of reassessment.

As regards the impact of the petrochemical result. It is due mainly impairment test, which was made in order to take into account the market situation and it accounts for something like EUR83m in [indiscernible] and 41m in the chemical portion of activity of [Synkell] the former [indiscernible].

Okay. Thankyou.

Next question from the line of Jeremy Elton.

Good afternoon gentlemen. A couple of questions. Firstly, are you able to give us any more color at all on your CapEx plan. I mean you have this number in he market of [EUR23b], which we all now know is not the humber you expect to spend. Can you perhaps tell us how much the uplift has been in the past between the four-year sanctions program and what you’ve actually ended up spending over 4 years. Secondly, on Spanish gas market were you seem to have as many partners in Spain as Don Giovanni. Can you tell us who you primary partners are now in Spanish Gas is and whether there’s any chance to rationalize your holding.

Yes Jeremy. As far as [indiscernible] plans concerned the Upstream. You know that we are expanding a lot and this is to fuel the natural growth plan 6% average growth rate, which we have as a target and which we confirm will achieve. As far as a the [Sygnet] and the comments we are receiving. We are, of course, as you heard before, we are working out a full-year plan, which will be based more on a normalized level of investment. Since we are really in the middle of the [indiscernible] we would not like to disclose figures until we have full digested [indiscernible]. Obviously they were not normalized levels. It was not on the level of what we have in terms of CapEx in 2002 and 2003. It will be on a lower figure but we would like to release the figure once [indiscernible] [fully] defined.

Great. And Spain?

Spain [inaudible] approach with the Union Fenosa dela that has been closed just a few days ago. Our strategy is to focus on the Union Fenose presence in the market. We are now looking in [[indiscernible] two channel. First one is the Union Fenosa gas. The second one is [Trugas] in Portugal. This is the way now to approach this market.

That’s great. Thanks.

The next question comes from Neill Morton.

I’m sorry we can’t hear you.

Mr Morton.

Is that clearly. Can you year me now?

Yes we can.

Two quick financial questions and one more general. Firstly in the E&P mentioned in Q1 that you had element of [indiscernible] which you might [indiscernible] was around EUR100m. Can you now say how much of that reversed out in the second quarter. Secondly, on the deferred tax credit. Is this a Q2 effect only, or could we see more tax credit coming through future quarters. The more general question is on gas and power. Really regards to Mr Minato’s comments recently about gas demand forecast [indiscernible] be over optimistic. There sees to be [indiscernible] projects targeting gas supply in the Mediterranean. I wondered whether over the past 12 to 18 months you supply demand balance had altered at all.

[indiscernible] on the tax issue. Definitely the extraordinary component is relevant to the first quarter. It’s not expected to be repeated on a semi-annual basis. I leave up to Stefano and Luciano to comment on the other two points.

As far as [indiscernible] I’d rather like to talk in volumes rather than in Dollars or Euros. We had a production sold in second quarter of 138.7b boe with a 12.5%. We have [indiscernible] which, if I remember right, was around 5m boe at the end of the first quarter. In terms of absolute figure, we are at the end of the second quarter about the same level, around 5b boe. Of course boe volume [indiscernible] to impact is now less than 2% impact on the total production available for sale. Contingent [events] would [indiscernible] for instance in countries such as Nigeria and Ecuador, but also related to operational situation of big physical cargo operation for the various [indiscernible]

The situation of gas supply in our country. We expect there is [indiscernible] [equilibrium] between the offer and demand up to the end of the [indiscernible]. Later on, discussion among different parties to optimise the investment of new plants. However, we have to say that in this year 2003, due to a lower consumption than expected and other gas imported by third parties, that we are suffering some problems for the [indiscernible]. We are out of [indiscernible] this year. However, this volume will be recovered in the coming two-year time. This is the situation as far [indiscernible] supply in our country.

Can I just follow up quickly. What you first forecast as [2010] Italian gas demand.

The gas demand in Italy per [indiscernible] between 90 and 95 this year. Depends how the new power plants will be built.

Thank you. Your next question from the line of Iain Reid.

Good afternoon. First question on the [Senietee] plant. I think you mentioned in the presentation that this was maybe due to [M] your equity gas [indiscernible] faster. Is it possible to tell us what volume of un-commercialised gas you have at present in [Egypt]. What sort of volumes that you could anticipate commercialising by the [ONT] plant? Secondly, another question about CapEx I’m afraid. Of the EUR23b in the planned 2003. Can you tell us how much of that is allocated to construction of the power stations, which are presently underway? When is that programme is expected to finish?

The second [indiscernible] the volume available in Egypt for export we reckon that we could export to the [indiscernible] a volume of gas of about 1.5b cubic meters per year for a period of about 20 years.

And that’s equity gas?

This is all equity ENI gas and, of course, we’re [partners] which will make [indiscernible] another 1.5m but this is [potential] to say. With regards the CapEx for the power. It’s in the range of the [blend] you mentioned. The [indiscernible] CapEx for power is in the region EUR2b and the reconstruction period expected to be ended in 2005.

And all the plants which you plan to construct [indiscernible] are presumably within the plan?

Yes.

Okay. Thank you.

Your next question comes from the line Irene Himona.

I’m [indiscernible] this is the last question that we answer in the conference call.

Okay Sir. The last question comes from Irene Himona.

Good afternoon. It’s Irene Himona from Morgan Stanley. My first question concerns cash again. The [indiscernible] have made it your development plan last year approval of that [indiscernible]. I wondered if you perhaps update us on any progress made there. When is it realistic to expect the plant to be approved and production to start? My second question is on gas and power. Can I just confirm that I understood correctly? Are you saying that the EUR150m negative input on 2003 gas and power from the contracts negotiation should be fully offset by growth in volumes and the weather effect? Could you perhaps give us some guidance on how you see 2004 gas and power?

I’ll give you an update on cash again. Yes you are right, we have presented the development plan at the end of last year. As you all know, is a [indiscernible] problem with a sizeable amount investment required. Discussion with the counterpart is still going on, but [indiscernible] to say that it is not time wasted for the project. We are going on with the front end [engineering]. We have started the site preparation for beginning the plans. We are working on a major contract and we are going on with the drilling, exploration and development [indiscernible]. Overall the project is going ahead and anticipated to [indiscernible] until we have a resolution of the discussion on what is going to be the date for the production cannot be done anymore.

[indiscernible] the gas power question that EUR150m will be offset by volume and scenario. While if I consider sort of outlook for 2004, I can only [indiscernible] what has already been anticipated when we presented the full-year plan. The new plan will be [indiscernible] as soon as approved.

Thank you for attending this conference call. If you have more questions or need more details you know where to find us. Thank you. Bye Bye.