埃尼石油 (E) 2004 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the ENI conference call on its 2004 Second Quarter Results and business trends, chaired by Mr. Vittorio Mincato, Chief Executive Officer of ENI. Throughout the conference call, you will remain on listen only. I will hand the call over now to Mr. Mincato. Please go ahead, sir.

Good afternoon, ladies and gentlemen, and welcome to this conference call today commencing 2004 Second Quarter Results and business trends. As you know, the second quarter was characterized by very positive market trends that contributed to the solid financial results that we are reporting today.

Despite the appreciation of the euro versus the US dollar in this period, the market environment was more favorable than the scenario we experienced during the first quarter 2004. In the second quarter 2004, we reported a net income amount to €1.28b, with an increase of 18%, compared to the same period of 2003.

The net income, excluding special items totaled €1.35b, with an increase of more than 43%. Such an increase is the result of 47% arising from operational results, mainly as a consequence of the high oil prices, as well as the good results achieved in the Gas and Power division.

Cost cutting for around €100m and over €70m for higher income from the investments mainly related to around €50m dividend payment from the Nigeria LMG. These positive effects were partially offset by high extraordinary expenses for €116m, mainly related to the [Brent remediation] and the positions in [the R&M] and in other activities. Higher taxes were as a consequence of the higher taxable income.

In the first half of 2004, reported and the free net income amounted to €3.4b, and a [indiscernible] of €3b respectively. The increase versus the same period of 2003 was of 11% on a reported basis, and of around 5% on a clean one.

In the first half 2004, report and clean EPS, there is an average number of shares of 3.77 billion shareholders in euro terms, an increase of 11%, and of around 5% respectively if compared with the same period of the last year.

If we turn to dollar terms, the increase of the reported and the clean EPS is of more than 23%, and around 17% respectively. Turning to cash flow per share in euro terms, we see an increase of around 3% on a reported basis, and 1% on a clean basis. In dollar terms, the increase is of 14% and 12% respectively.

As far as our production is concerned, in the second quarter 2004, hydro-carbon production reached 1.621m boe per day, an increase of 4.2%, versus the corresponding period in 2003. Such growth is the result of the fields set up in Pakistan and Angola, as well as increased production in Egypt, Nigeria, Venezuela, Pakistan and Kazakhstan, partially offset by declines of major fields in Italy and in the UK.

This quarter, we also finalized the disposal of some Italian assets, and the [Malcolm] Field in the North Sea, as together counting for 4,000 boe per day. In the first half of 2004, hydro-carbon production reached 1,624m boe per day, up 6.4% versus the first half of 2003.

This result is in line with our yearly target of 5% growth. As to the [upturn] in business, I would like to update you on some major products that will support ENI’s production trend, both in the short and in the long-term.

Starting from Kazakhstan, in May, we completed the remedial works in the Karachaganak [indiscernible] center, and Unit 2 infrastructures in Karachaganak. Production started to flow [to the sea] and to Novorossiysk. The first shipment called in June 2004. Raw gas injections of 500 bars, the highest in the world, are underway. Currently, Karachaganak ENI equity production has almost reached the total production of 100,000 units a day.

Let me now spend a few words on the giant Kashagan field. First of all, I would like to confirm that the development phase of the project is on schedule, as the Kazakh state a willingness to acquire BG’s space in the partnership. We wish to remind you that the involvement of a national company in absent projects is a common practice in the oil and gas industry, and as such, we are prepared to accommodate the Republic’s desire.

Furthermore, in Kazakhstan, we have recently achieved exploration factors in [indiscernible]. These good results follow the successes obtained in Aktote, Kalamkas, and Kashagan South West, all part of the North Caspian Sea PSA. This 100% success rate of exploration [contained] confirms the high potential of this region in terms of hydro-carbon reserves.

Finally, I want to confirm that apart from the large-scale projects in Libya – WAFA, Angola – Kizomba A, and Iran – South Pars 4 and 5, expected for the second half 2004, are practically on track. These projects will boost our production about 1.7 million boe per day in the last quarter of the year.

With regards to the gas and power business, overall gas volumes sold both consolidated and appreciated, rose by around 15% in the second quarter 2004, reaching around 18 bcs.

In particular, Italian sales increased by 2%, as a result of higher sales to wholesalers and [indiscernible] customers. If we add the self-consumption, mainly related to ENI Power, P&I overall gas volumes sold achieved [indiscernible], in the second quarter 2004, increased by 7%, if compared to the corresponding period of last year.

In the first half 2004, the [overall] Italian gas demand confirmed this dynamic trend driven by the Powergen segment, reaching 43 bcm, with an increase of 3.6%. In the same period ENI gas sales were up by 2%. International oil sales rose by around 30%, reaching 7 bcm from 5.4% in the second quarter 2003, as a result of higher consolidated gas sales, mainly in Turkey and Spain. These results are fully consistent with our growth strategy in [indiscernible] and gas business.

Now, I would like to briefly update you on our recent deals. As part of our E&P Portfolio Rationalization Program, the following deals were made. In the UK North Sea, an agreement was signed for the sale of our operated interests in [indiscernible]. On June 29, a binding agreement was concluded for the sale of our 50% stake in LukAgip, [jointly with] Lukoil. In Gabon, all our marginal assets were sold.

In the Gas and Power sectors, the main event is the [viewing] of the Italian Anti-trust Authority, regarding a gas release for 2.3 bcm on a yearly basis, for the 2004-2008 period. [Indiscernible] something about to be [indiscernible]. Following the Anti-trust [indiscernible] of November 2002, of the [blue gas plate] to obtain access to the importation capacity, in April 2004, the Italian Anti-trust authority has said that ENI did not comply with the regulations of the Italian Gas Market [indiscernible], and therefore declared that it could fine ENI.

Such fine could have been applied unless ENI would implement [strategic] measures in order to eliminate the asserted infringement of the regulations. In this framework, in June 2004, ENI proposed to the Anti-Trust Authority, to carry out a limited gas release program of 2.3 bcm for a year, for each of the four gas firms a year, for the period 2004-2008, and to [apply] with the conditions.

On June 24, the Italian Anti-Trust Authority stated that the gas release program proposed by ENI, if implemented, would be sufficient to eliminate the effect of the asserted infringement of the competition rules to determine the risk it [indiscernible] in November 2002, the [indiscernible].

The gas release will occur at a price that according to the authority, is in line with the one that a new player will have to pay to import gas into Italy. This reallocation procedure has started last week. We are currently receiving the indications of interest for the gas release.

I would like to add that in 2004, the gas release starting October 31, will account for 600 million cubic meters. The economic impact, at the G&P EBIT level is negligible, and expected in the range of €10m to €16m. Of course, the economic impact related to the 2004/2008 gas release should be counted as part of the €600m of negative effect in the G&P margins, respective of the competitive pressure in Italy.

Finally, in the R&M business at the end of last June, we reached an agreement to sell the entire stake of Agip do Brazil to the Brazilian based company, Petrobras. The disposal is part of the ongoing strategy aimed at focusing ENI’s [indiscernible] activity in Europe. The closing of the deal is expected in the coming weeks.

That’s all. Thank you for listening, and now I shall hand you over to Marco who will analyze the second quarter results [indiscernible].

Thank you Vittorio, and good afternoon, ladies and gentlemen. I know that today has been for you a very tough and busy supporting day, and I will try to briefly focus on 2004 second quarter results. As usual, I have to start with the disclaimer, and I would like to remind you that any results are affected by several factors, including the seasonality and demand for natural gas, and focus on products used in residence heating, the demand of which is higher in the first quarter of the year, that includes the coldest month, and lowest in the third quarter, which includes the warmest month. Therefore, ENI’s operating income and change in net debt in the first six months cannot be extrapolated for the full year.

Having said that, let’s go into more detail. Leveraging on the positive market scenario already commented on by Vittorio, the second quarter reported operating income amounted to €2,609b, with a 46.7% increase versus the corresponding period of 2003.

Excluding [net] of special items, the second quarter 2004 operating income totaled €2,606b, or 28.3% up on a like-for-like basis. Let me remind you that in the second quarter 2003, the operating income was affected by negative special items for around €250m, mainly related to asset write-downs in E&P and in [indiscernible] factors.

If we add the effect of the euro appreciation versus the US dollar of more than €180m in the second quarter of 2004, of which €130m related to the translation effect, the increase in the clean operating income of 2003 would be more than 37%. It was that the negative impact of the euro appreciation versus the US dollar, it is mainly related to the upstream business.

The operating income, excluding special items of the first six months of 2004, totaled €5.8b, up 7.8% versus the same period of 2003. Once again, if we add the effect of the euro appreciation versus the US dollar of around €500m in the first half of 2004, of which again, €240m related to the translation effect, the increase on the clean operating income of 2003 would be more than 17%.

Let me now go into more detail for each division. The second quarter reported operating income in the E&P amounted to €1,790b, with a 52.3% increase if compared with the corresponding period of 2003. The result is mainly related to higher oil realization prices denominated in US dollars, following the positive oil market scenario, higher hydro-carbon production sold, lower exploration costs and lower amortization of exploration bonds. These positive effects were partially offset by the 6% appreciation of the euro over the US dollar.

The second quarter results include the negative special items for €57m, related to asset write-downs in the USA, partially compensated by the gain of €49m related to asset disposal. The E&P clean operating income amounted to €1,798b, showing an increase of 41.1% over the same period of 2003.

If we turn to the first half, the reported operating income reached €3,359b, up by 15.4% versus the same period of 2003. Excluding special items, the increase is in the range of 12%, with the operating clean result reaching €3,399b.

As far as the Gas and Power business is concerned, the second quarter reported operating income amounted to €595m, 10.4% up if compared to the €539m accounted for in 2003. The increase is related to better results in the transportation activity abroad arising from higher tariffs, and the higher contribution of the Power Generation business, due to the increase of electricity production sold. That’s 2.3 kilowatt per hour, or +186%.

The result in Marketing and Distribution activities has shown a substantially flat trend, as a consequence of lower margins due to a change in sales mix and for receivable currency, but which were partially compensated by the higher volumes sold income and abroad.

The second quarter results include the positive special items for €11m, related to the reimbursement of the first installment of the Environment Tax, levied by the Sicilian region in 2002 on Snam Rete Gas. The Gas and Power clean operating income amounted to €584m, with a 7.7% increase over the same period of 2003.

In the first six months of 2004, reported operating income reached €2,157b, 4.3% up if compared to the results achieved in 2003. If we turn to the clean operating income, it reached €2,156b, up 4.1%, on a like-for-like basis. These results have been obtained thanks to the still favorable market trend, and the contribution from the Power Generation international gas expansion, and the transportation abroad which entirely offset the competitive pressure we are facing in Italy.

Let’s now turn to the R&M sector. The second quarter 2004 reported operating income totaled €205m, a 1.4% decrease versus the 2003 results, due to lower contribution from the marketing activity in Italy, and in other European regions, mainly related to depressed marketing margins. The rises in prices and product costs, which have not been fully [concerted] to bump up prices, as well as higher charges related to the renewal of certain highway concessions, the royalties we pay to the highway, were the main reasons underlying the drop in marketing margins.

These negative effects were partially compensated by the strong increase from the contribution of the refining activities, related to the new peaks reached in refining margins, as well as by the higher sales in the marketing activity abroad.

Let’s now have a look at the other businesses. In the second quarter of 2004, the Petrochemical business posted an operating income of €50m, compared to the operating loss of €34m in the same period of 2003, thanks to higher volumes sold, mainly for ethylene and base chemicals, partially mitigated by lower margins in the base chemical segment. It is worthwhile mentioning that the second quarter 2003 was affected by asset and inventory write-downs for something like €106m.

In the second quarter 2004, the Oilfield Services and Engineering reported operating income amounted to €67m, with a 15.2% decrease as compared to the same period of 2003, mainly as a result of the lower contribution from the onshore construction, as a consequence of the completion of projects in Kazakhstan, Saudi Arabia and Nigeria, as well as the less positive results of the offshore [ingredient].

In the second quarter 2004, the €30m operating loss in the other activity is substantially related to the single €46m negative result.

As far as investments are concerned, capital investment in the second quarter amounted to €2b, of which 95% was concentrated in the core business. In particular, €1.3b was invested in the [upturn] sector, about 64% of the total, and €430m in the Gas and Power business, about 21% of the overall amount.

In the first half 2004, the CAPEX was €3.7b, with a decrease of 5% if compared to the same period of last year. This CAPEX provided is in line with our forecast for the full year 2004, when we expected to post overall CAPEX in the range of €8b.

The total investments in the first six months of 2004 were €3.84b, with a decrease of 49%, mainly due to the €3.6b equity investments related to the acquisitions of [Fort], Union Fenosa Gas, and Italgas, accounted for in the first quarter of 2003.

Before opening the Q&A session, I would like to comment on the net debt [in the year]. Net debt as in 2004 amounted to 12.8b, around 1.5b higher, if compared to March end figures, mainly as a consequence of the payment of dividends and of taxes, as well as CAPEX requirements. These were partially compensated by the cash generated in operating activities, and the cash deriving from the Snam Rete Gas port deal.

However, the net debt at the end of June was around 750m lower if compared to 2003 year end figures. This is a significant result, achieved mainly thanks to the strong operating cash generation in the period.

Our debt to equity ratio decreased to 0.43, in comparison with 0.48 for 2003 year end figures, higher than the 0.36 at the end of March but tending towards the 0.4 ceiling set in our strategic plan. Thank you for listening. Now, Stefano Cao, Luciano Sgubini and Mario Taraborrelli will be pleased to answer, with that, any questions that you may have.

Hello, we are ready for any questions coming from the audience.

Yes, the first question that we have comes from Mr. Iain Reid from UBS. Please go ahead, sir.

Good evening, gentlemen. I have two questions, please, firstly on Kashagan. We’ve read about the impounding of the [Parka] drilling barge, and also the problems which you’ve had on Karachaganak on duties, etc, and now we have the government trying to pre-empt the BG sale. Is the government in Kazakhstan becoming much more difficult to work with now, particularly on this project, and do you anticipate any delays to construction or production as a result of what’s going on here?

Secondly, I’d just like to ask a quick question on R&M. You’ve mentioned the differential between marketing and refining profits. I wonder whether you can split them for us in this quarter? Thanks very much.

Yes, Iain, it’s Stefano speaking. Kashagan, and actually you read [the statement] about Kazakhstan as a whole. You mentioned a number of cases which I think they have all, specifically, [indiscernible], they tend to be completed different ones from the other. First of all, the example of the barge, the Parka barge was purposely built to cover for the requirements of the exploration campaign in Kashagan, in the North Caspian Sea area, and after nearly five years of continuous work, the barge has been released.

The contentious part was actually at the end. It was between the contractor and the tax authority that was related to the [indiscernible] of the barge, so actually, it’s nothing to do with the consortium, and nothing to do with the performance of the consortium party.

The issues related to taxes, you know, we have to do a number of regular audits and this is absolutely normal, and it is also normal that there might be discussion related to the result of the audits. I should say that this is a fairly standard sort of business, which becomes a bit more noisy in a country such as Kazakhstan but which, so far, has not caused any major problem to the companies involved, the foreign companies involved.

The discussion about the [indiscernible] right and the so-called [pension] applied by the Republic, the conversation is going on, on this issue. The discussion has nothing to do with the progress of the project. The project people are fully focused on the development of Kashagan, and the consortium companies that are represented, at the higher level they are involved in the discussion related to the [indiscernible] right.

Normally, in our industry, it happens very often that we have national companies, together with us, in the operations, in large numbers of countries around the world. Our attitude would be that we would certainly see positively the country’s position within the consortium of [other companies]. We would certainly see the advantage on the longer-term, so, as a consequence of that, none of the examples you raised are causing impact, and causing delay on the development of the project.

We have already awarded since the start of the development phase – we already awarded around $2.4b or $2.5b worth of contracts. You will see that in the next days and weeks, there will be an announcement for more than the same amount to be awarded. I think this consideration, together with what we have seen, the successful completion of the exploration campaign, you know, makes us feel very positive about the country and the operation we are in.

As far as the breakdown is concerned, I have to say that normally, we do not disclose the breakdown of Refining and Marketing, but I can give you more details about the situation in the second quarter, as far as the Refining and Marketing are concerned.

Now, as far as Refining is concerned, we benefited from a very positive scenario, and in addition to this, we enjoyed a widening differential between heavy and light goods. In addition to that, we have also declining prices for semi-finished products vis-à-vis last year, when the CU price was very high because of the market situation, maybe in the US, as a consequence of the high price of natural gas. Such a positive effect of these factors on the Refining performance has been eroded by the stronger euro, vis-à-vis the dollar.

As far as Marketing is concerned, we basically have very weak demand in the market scenario, where we found it very difficult to pass to the price at the [pound] the increasing costs of the manufacturers. As Marco Mangiagalli already reported, we had an increase on the royalties to paid to sell products on the highways, and an increase of the compensation of our bidders.

We found it very difficult in a weak demand environment to pass to the final consumer the increase in costs. The consequence of this was an erosion of the overall margin of our marketing activities. Such a negative situation was partially compensated by higher volumes sold abroad as a consequence of the acquisitions which we entered into in the last couple of years.

It is worth recording also that as far as Refining is concerned, we have an increasing throughput on our refineries that helped to achieve a very positive performance in the Refining segment.

Okay, thank you very much for that.

Thank you. The next question is from Mark Naughtie (ph) from Merrill Lynch. Please go ahead, sir.

Good afternoon, gentlemen. I have a quick question following on from Iain’s comment on Kashagan. Can you give us any assurances that the Kazakh government will pay their own way in terms of the development of the project, and also, that they are not intending to sell that share at some stage onto the Chinese company then, if they try to buy the asset from BG?

Quite frankly, I wouldn’t see, really, what would be the implicit difference. No, I get that – the answer that I was giving earlier on is in the direction of supporting the fact that no, we don’t expect anything which might [upset the], you know, impact our future operations. I would say the consortium, all the foreign companies’ operations in Kazakhstan, you know that it’s a free world, and BG decided to sell about more a year ago, and as a result, the Chinese company, they were willing to intervene, and take the share.

Of course, seeing the high value, the participants – actually, all the participants, excluding [indiscernible] decided to exercise the pre-emption rights, you know. I think that’s a very good indication of how high is the attention of the odd company, the international companies for the activities in Kazakhstan.

Thank you. The next question is from Miss Caroline Cook from Deutsche Bank. Please go ahead, Ma’am.

Hi good afternoon, or evening, to you gentlemen. Just two questions, first of all, you’re undershooting a bit on CAPEX. I know that the guidance for the year stays the same. Obviously the macro environment is very strong. I just wondered if you would be able to comment on where we are in terms of buying back shares this year, how you feel about buying back more in the second half, and maybe whether you’re giving any further thought to dividend policy, which is obviously for a flat nominal dividend out to 2007.

And secondly, on Kashagan, can I just ask a question about maybe the fields that will provide early production from Kashagan, and whether you’re about to say yet which of the various discoveries you’ve made in the development area, might actually be contributing in the early years of production? Thanks.

Caroline, this is Marco speaking. Okay, about CAPEX, we commented already. As far as buy-back is concerned, as you might have seen, we have bought, I would say, a marginal amount of shares in the first half of 2004, as a further indication of the fact that having approached the 0.5 debt to equity level at the end of last year, our first priority was to reduce the debt to equity ratio, which is something which we are pleasantly experiencing.

We presently own 5.83% of our share capital, and as regards to the policy which will be adopting in the forthcoming months, since you made reference to the strong scenario, there is no doubt that we will be considering our policy on the basis of the present favorable conditions.

As far as dividends are concerned, well, for sure we leave everything open until the beginning of next year, when, traditionally, the dividend policy is publicly announced. We do not see, for the time being, any reason for changing the statement relevant to the sustainability of the €0.75 per share.

Okay, thank you.

Caroline, as far as the Kashagan initial production is concerned, the development plan budget, which was approved in February this year, with the level of investment and the level of production which you heard me mention a number of times, calls for the development of the main Kashagan structure.

Of course, in parallel, at the same time, we have seen [it altered] to the analysis of the various options on the other discoveries, outside the main Kashagan structures. At this stage, the answer is certainly the first production will come in 2008, and it will come from the main Kashagan structure.

You know, anything that might come out due as a result of the additional [targets], on the other opportunities, that will be, you know, fully realized and announced in due time.

Okay, thank you very much.

Thank you. The next question is from Mr. Tim Whittaker from Lehman Brothers. Please go ahead, sir.

Yes, good evening. Could you give a little bit more information on the next income from investments line as opposed to variance from last year’s, [that boost stream outpour]. What are the changes there? And could you remind us of your guidance on the annual tax rate, given the slightly higher tax rate this quarter?

Yes, I’ll begin with the tax rate, which is the fastest answer. We are still commenting as to what are the ranges between 40% and 42% as a tax rate, at year-end.

As far as the benefit from the results from the shareholdings, we had in the second quarter an overall – let me say, cash-in – in the range of €120m, out of which €64m were coming from dividends, and the major component was the dividend distributed by our L&G participation in the range of €50m, [inaudible], Nigerian shareholding, about 50m, as Vittorio mentioned. Then we had something in the range of €20m as a result of the sale of [indiscernible], and then we had, let me say, sundry, smaller components, which overall, amount to about €40m. I can tell you that the major components are about €11m coming in the Gas and Power division, and about €6m in the R&M division.

Okay, thank you. Could I just mention one more thing? Would it maybe be possible in subsequent quarters to put out the full financial report at the time results come out, rather than later in the day?

Sorry, I didn’t understand. The full?

The full financial report, would it be possible to put it out earlier, at the same time as the short results release comes out?

Well, we are considering that.

Thank you.

Thank you. The next question is from Mr. Vincento Pozza (ph) from John S Errold. Please go ahead, sir.

Hi, good afternoon. With reference to your €2b asset retirement obligation, on the balance sheet, to which segment does that pertain?

About, sorry, I didn’t get it. €2b assets?

The retirement obligation on your balance sheet, at year-end, 2003, I was wondering if that is mostly related to R&M activities, or E&P as well?

It is substantially E&P.

May I know what regions in primary, say the two most important regions that might pertain to?

You mean geographical regions?

Yes, geographical.

Listen, let me have a look. If I can, I come back to you. If not, I will come back to you separately.

Okay.

Thank you. The next question is from Mr. Edward Westlake from CSFB.

Yes, hi, I have a number of questions. The first one is obviously Kairan, 500 meters of net pay. Have you got any sort of feel for the sort of volumes in that field?

The second one is any progress on export routes from Kashagan and timing of potential pipelines. The third question is on Wafa, and whether you’re expecting the start-up phase of that to impact your costs and profitability, and then the final question is what sort of cash do you expect in total to get in, in the second half from the sales of the LukAgip stake, and Petrobras refining?

Well, I will start on the comment on the [debt] to be paid. We encounter in Kairan a certainly positive – you know, at a first glance, but this is something which has been subject to a number of studies, so it’s very early to comment, but certainly, it’s a very positive feeling.

About transport, the transport at the time of approving, and launching the development plan in budget, we have on a number of occasions mentioned that transportation has been calculated on a basis of operating costs. We have accounted, at E&I, in order to get to the overall IRR expected for the project, we have considered a level of $4 a barrel for transportation costs.

We reconsidered today going back to that evaluation we still consider as being a very [accurate] number to cover for both the existing transportation system, and to cover for the building of a dedicated line for the transportation of the Kashagan oil, a dedicated line, which, according to the [B&C] but also according to the general logic, certainly is something which, you know, by the time we get to the 1.2 million barrels per day production, plateau production, is certainly something which will be implemented.

A number of studies are currently ongoing, and we are awaiting all the possible alternatives in terms of north, south, east and west. What appears to have a priority in terms of the most logical way of considering transportation systems is the connection between the business facilities onshore, the [business] facilities dedicated to the Kashagan, and the [indiscernible], which implies the building of a line around the Caspian Sea, the building of a terminal, so that there can be some planned shipment of oil up to the [indiscernible] terminal on the other side of the Caspian.

Fine.

If I understood correctly, you were asking about the cash-in, or the expected cash-in of the amounts of deals with reference to Petrobras, LukAgip and Galp. I think that as far as Petrobras and Galp, even if it not formally announced, they have been already reported in the press, and as far as Petrobras is concerned, we are in the range of €500m. As far as Galp is concerned, it has been reported in the range of €600m and €650m.

You also asked about LukAgip. We do not have the possibility for the time being to make any announcements in that respect, but I would like to stress that we are not speaking about hundreds of millions of euros, but in tens, I would say, as a guidance.

I think I have the answer to the gentlemen who asked about the countries which are those involved in the assets to be written down, and these are Italy, the UK, Nigeria, Norway and the abandonment planned refers to Italy, the UK, Nigeria, Norway and the US. These are the major geographical contributions.

Thank you. The next question is from Mr. Ben Doe (ph) from Sandford Bernstein. Please go ahead, sir.

Hi, thank you and good evening. The question I had really, there were three. The first of which, the [selling of the] Lukoil stake, does that suggest that you have less interest in investing in Russia in the long-term? Would you consider other investments going forward, equity investments, or other major projects?

The second question is, could you just give us some detail on the operational up-time in the UK North Sea and lastly, could you just outline the commitments you made in the recent Norwegian licensing round for wells and seismic studies going forward?

Yes, this is Stefano Cao. The reason for selling LukAgip, we sold a joint venture which we had established in the second half of the 1990s with Lukoil to run certain operations in explorations in Russia, certain explorations, in the [indiscernible] region and certain operations in Egypt. Some six years later, the joint venture has not been successful in Russia. The joint venture has been successful but has got, I should, a fairly non-sufficiently material participation in the [indiscernible], a 10% for the company, which means 5% equity, and the company has a very small operation in Egypt.

So, at the time of launching, but [before] the actualization exercise, LukAgip came, from our perspective, as a natural candidate for disposal, so we launched a process, and you know, the process has concluded with the sale and the buyer ended up being our partner Lukoil, who has obviously a different strategy, different [process] a different sort of portfolio, so I think the operation has suited both partners, so we remain extremely friendly with Lukoil, and we look forward to finding other opportunities with them.

In terms of operational upside, in the North Sea, I gather you referred to the rationalization which we are in the process of doing and selling the operated asset in the B&C block.

I was actually interested in those, in terms of percentage up-time, how often your facilities are running. Was it sort of 85%, or nearer 95%?

Well, at the moment, after the sale of the assets, we had no operated assets, so you are referring to the non-operated portfolio in the UK?

Yes.

Let’s see if we can get the answer. Licensing in Norway, we see it as a sort of a counter-balance of what is happening in the other side of the North Sea. You know at the moment, we are producing 150,000 barrels of oil equivalent per day in Norway. The profile will remain fairly stable for a number of years, so we very positively looked at any opportunity to improve and implement our portfolio, so we view the success which we had with – there were two operated blocks, as very positive.

Right.

Thank you. The next question is from Mr. Jonathan Cooper from HSBC. Please go ahead, sir.

Hi, it’s Jonathan Copus from HSBC. I have just two quick questions. First of all, you highlight the strength of the gas sales outside of Italy, and interestingly, you mentioned Turkey as well as Spain. I was wondering, could you give us some sort of update on where you lie in these countries relative to your 2006 international volume sales target?

And then, for the second question, it was just, you usually give us some indication in terms of the financial impact to the change in sales mix within the primary gas sales in Italy. I just wondered if you could give us a figure for that?

Yes, Sgubini speaking as far as our gas selling program in Europe. We are completely on track with our four year plan. So far, we are going to increase our volume, specifically in the country where we are. We grow [significant] in Turkey, now that the bluestream is completed, and now we are in the deal [dock] phases as for program. We plan to deliver a total figure of 100% in the year 2004 in Turkey of 4 bcm. About 50% will be ENI’s share.

We’ve talked also to sell our gas [business] in our portfolio to [GOS] so we are going to consolidate our presence in Germany as well as in Spain. As you know, in Spain, at the end of the year, the gas coming from Egypt was part of the [indiscernible] is on track, and we, happily next year, the first sheet will be delivered to Spain. So the project, all the projects in G&P are in line with the program.

Okay, we have room for the last question, if we’ve completed the answer to the one before, so just room for one more question.

Okay, the final question comes from Mr. Barry MacCarthy from Exane. Please go ahead, sir.

Hi, it’s two quick ones if I can, one on Gas and Power. You gave guidance at the first quarter stage, from which I inferred full year earnings, operating earnings of €3.4b. Is there some way you can update us on the earnings you expect from Gas and Power following two relatively strong quarters? Just, if there is time for a follow-up, you mentioned a change in the mix in margins in Marketing and Distribution. If you could say anything to add some detail on that, that would be helpful. Thank you.

Well, I can say that what we anticipated in the first quarter is confirmed. Our operating result will be in the region of €3.4b, €3.45b. What about the second question? Can you repeat please?

It was a comment at Slide 15, the marketing and distribution within that, you said there was a change in the mix, the margin mix. I wondered if you could add some detail on that. Was that something to different sectors, or was that domestic versus international?

No, the change in the mix, what is peculiarity here is that, yes, we are going to proceed with the gas release of 2.3, so this gas release will change the gas mix for the year 2004 and for the other four year program.

Thank you.

Okay, thank you. Have a nice evening, a nice holiday.

Thank you, ladies and gentlemen, and that concludes today’s conference call. You may all now disconnect.