埃尼石油 (E) 2004 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the ENI conference on 2004 third quarter results conference call chaired by Mr. Vittorio Mincato, ENI’s CEO. My name is Tim and I will be your Coordinator for today’s conference call.

Throughout the duration of the conference you will be on listen only, however you will have an opportunity to ask any questions at the end of the conference call. [OPERATOR INSTRUCTIONS].

I will now hand over to your Chairperson, Mr. Mincato, to begin your conference call.

Okay. Good afternoon ladies and gentlemen. Before I present the quarterly results I would like to start this conference call by commenting on the market rumors following my recent Hearing at the Treasury Commission of the Italian Parliament about privatization point. At the beginning of the said Hearing I was asked by the Chairman of the Commission to comment on the impact of a possible further reduction of the Italian Treasury’s presence in ENI. My answer was simple and clear. ENI would become a target of a potential takeover.

Following additional requests I referred to the market practice which implied a larger capitalization to make such a possibility much more difficult to happen. I also recalled that our value increased from €20b in 1995 to this current €70b.

Some days later in an interview I got the opportunity to point out that what I had in mind was a doubling of our capitalization. In fact, I believe that our shares are still undervalued and in fact, probably, the current share price is not fully recognizing the strong growth in our core business, the quality of asset portfolio and the delivery of important strategic targets. But also, where increased value of our strategy for the future.

A recent [rumor] misunderstood my comments on ENI’s size and linked them to the current developments in the Russian oil and gas sector by assuming that we are presently negotiating a corporate acquisition in Russia. For the sake of clarity, I think it is worth explaining once again our policy regarding 2 key strategic drivers – growth and the cash allocation.

In the coming year, ENI’s strategy will still be driven by organic growth through the development of projects, high integration between the FD and GN business and an active portfolio management both in terms of assets disposed of and potential asset acquisition.

The enhancement of our activities in core areas, this goes along with the interest in reaching a material presence in the regions with high hydrocarbon potential and Russia, amongst others, is only 1 of these areas.

In addition, we will analyze and consider new themes such as the non-conventional oils to diversify our upstream portfolio.

Considering the regulatory price strength and the expected market scenario for the next years, we are convinced that presently corporates are too expensive and up to now, we haven’t found any real opportunities that can add value to our Company.

On top of that, we are not interested in many stakes in big oil companies either in Russia or in other regions unless that involves an import of the role from booked and industrial and the corporate governance people. As you know, we prefer to invest in attractive and large scale projects, sharing the industrial risks with the local partners.

Of course, if several opportunities will materialize in the near future, it will be important to have the solid and flexible balance sheet in order to effectively try and seize such an opportunity, always applying our strict financial criterion.

I am well aware that the correct and productive cash allocation is ultimately the key element for increasing ENI’s value and maximizing returns of our shareholders, particularly in the scenario of a high oil price.

ENI’s [levers] in allocating cash are first of all investment for sustaining the production growth in core business, developing profitable projects and the replacement of hydrocarbon reserves, the remuneration of our shareholders in obtaining an attractive and competitive yield compared to the other oil and gas players. And finally, continuing our share buyback program, always having in mind debt to equity ratio ceiling consistent with our current and future business portfolio.

As part of the 2005, 2008 strategic planning recently submitted to the Board of Directors, we are currently examining the dividend policy and the share buyback program. Of course, it’s too early for commenting detail on that development. But in any case, I am confident that the market will be pleased by the final outcome of this important method.

Before handing you over to Marco for the comments on the quarter, I would like to update you on Kashagan insight. As to the giant field of Kashagan we confirm that the project development is in line with the schedule. We have awarded more than €5b supply in service contracts since the first month and I confirm that the negotiations between British Gas and the Kazakh government are not interfering with the development of the project.

As to the Kashagan stake requires the PG stake in the partnership. I would like to point out that the involvement of nationalized companies in those projects is a common practice industry and as such we are prepared to accommodate the Republic’s [right].

Finally, Galp. We are working together with the Portuguese government and ECP for a positive solution of the objections raised by the [indiscernible]. We are submitting some proposals to the authorities that should satisfy the request without jeopardizing the other investor rationale of the deal signed between ENI and Electricidade de Portugal last February.

Thank you and now I give the floor to Marco.

Thank you Vittorio. Good afternoon ladies and gentlemen. 2004 oil prices in dollar terms the highest since the beginning of the ‘90s were supported by strong growth demand, mainly in the USA and China and concerns about supply disruption.

In addition, OECD commercial inventories remains low relative to 5 years average even though oil production has increased. In particular, in the third quarter 2004, Brent price in dollar terms showed an increase of 46% on a yearly basis. That’s contributing to the solid financial result we are reporting today, only partially offset by the appreciation of the euro versus the US dollar in this period.

As usual I would like now to remind you that ENI’s results are affected by several factors, including the seasonality in demand for natural gas and for petroleum products used in residential heating. The demand of which is highest in the first quarter of the year. That includes the coldest months. And lowest in the third quarter, which includes the warmest months. Therefore ENI’s operating income and change in net sales in the first 9 months cannot be extrapolated for the full year.

Having said that, in the third quarter 2004 the reported net income amounts to €1.67b, with an increase of around 75% compared to the same period of 2003.

Such an increase is the result of a 58% rise in the reported operating result, mainly as a consequence of the strong performance in upstream and demand in petrochemical divisions, as well as of the good results achieved in the Gas and Power Business.

Lower net financial charges, the recognition of deferred tax assets or around €260m not accounted for in 2003 consolidated financial statement concerning the value of stocks on the projects.

These positive effects were partially offset by higher extraordinary expenses for around €160m. Mainly related to the environment remediations and provisions in the R&M and [indiscernible].

The third quarter net income, excluding special items, totaled around €1.39b. It was an increase of 44.1%.

The first 9 months of 2004 reported and clean net income amounted to around €5.1b and to around €4.4b respectively. Increase versus the same period of 2003 was around 26% on a reported basis and around 15% on a clean one.

The third quarter 2004 reported a clean EPS based on an average number of shares of 3.77 billion showed in euro terms an increase of 75.1% and of 44.3% respectively if compared with the same period of last year.

If we turn to dollar terms, the increase for the reported and clean EPS is of more than 90% and of around 57% respectively.

Turning to cash flow per share, in euro terms we see an increase of around 33% on a reported basis and of more than 19% on a clean basis.

Dollar terms the increase is of 44.5% and 29.8% respectively.

Leveraging on the positive market scenario and good industrial results, ENI’s third quarter reported operating income amounted to around €3b with a 57.5% increase versus the corresponding period of 2003.

Excluding net positive special items of €161m -- €171m mainly relevant to the upstream business, the third quarter 2004 operating income totaled €2,816m – 7.1% up on a like-for-like basis.

If we add the effect of the euro position versus the US dollar of around €230m in the third quarter of 2004, the increase in the clean operating income on a yearly basis would be around 59%. We've seen that a negative impact of the euro appreciation versus the US dollar is mainly related to the upstream business.

The operating income excluding special items of the first 9 months of 2004 totaled €8.63m. Up 18.1% versus the same period of 2003. Once again, if we add the effect of the euro appreciation versus the US dollar of around €750m in the first 9 months of 2004, the increase with the clean operating income on 2003 would be 28%.

Let me now go into more detail for each business, starting from the upstream. In the third quarter of 2004 hydrocarbon production reached 1,545 boe per day. A 0.7% decrease versus the corresponding period in 2003. Such reduction is due to the impact of the higher oil prices from $28.4 per barrel to $41.5 per barrel on PSA and by the contracts which accounts for approximately 52,000 boe per day. And the effect of Hurricane Ivan in the Gulf of Mexico let's say in the range of -4,000 boe per day in the quarter.

Before the impact of the PSA effect, product in the third quarter of 2004 was up 2.6% on the corresponded period of 2003.

In the first 9 months of 2004, [fertilizer] carbon production reached an average of 1.6m boe per day, with an increase of 4% if compared with the same period of 2003.

Before the impact of the PSA effect, production is up 6%. Well in line with our target year-to-date of 5% for the 2003/2007 period.

Third quarter reported operating income in the E&P amounted to €2,360m, with a 62% increase if compared with the corresponding period of 2003. This result is mainly related to higher hydrocarbon [amortization] prices denominated in dollars following the positive oil market scenario. This positive effect was partially offset by the 9% appreciation of the euro over the US dollar.

The third quarter results include the positive special items for €182m related to gains from the disposal of assets in the UK B and C Clock and Gabon.

Exploration and Production clean operating income amounted to €2,178m, showing a remarkable increase of 48.4% over the same period of 2003. Returns for the first 9 months, the reported operating income reached €5,719m, up by 31% versus the same period of 2003.

Excluding special items, the increase in the range of 24% with the operating clean result reaching around 5.6%.

As far as the Gas and Power business is concerned, overall gas volumes sold both affiliated and associated rose by around 12% in the third quarter 2004. Reaching more than 16 VCM from 15.7 in the third quarter 2003.

The bulk of this increase in the range of 1.6% comes from our consolidated sales in Italy and abroad. In the first 9 months of 2004, overall gas volumes for both affiliated and associated rose by more than 10% compared with the same period of 2003, reaching 61 VCM. In particular Italian sales increased by 3.6% as a result of a higher sales consumption related to ENI Power.

Overall, international sales were up 25.1%, reaching 21.6 VCM from 17.3 in the first month of 2003 mainly as a result of higher consolidated gas sales in Turkey and Spain. These results are fully consistent with our growth strategy in international gas.

Third quarter reported operating income amounted to €450m, 6.4% up if compared to the €390m accounted for in 2003. The increase is related to higher volumes sold in Italy and abroad and marketing and distribution activities offset by lower margins due to a less favorable currency. But as well as competition in Italy, higher contribution by the Power Generation business due to the increase of electricity production sold and better results in the transportation activity both in Italy and abroad.

Let me remind you that because of the high seasonality for natural gas used in residential heating, the result of marketing and distribution activities is usually the year’s lowest.

The third quarter results include negative special items of €4.5m related to the Italian anti trust fine inflicted for the late delay in proposing and implementing the gas release for 2.3 VCM on a yearly basis for the 2004/2008 period. ENI is currently considering the possibility of a appealing the administrative report against the fine.

Before special items, the third quarter 2004 operating income amounted to €420m. Up by 7.7% over the same period of 2003.

In the first 9 months of 2004, reported operating income reached €2,582m. 5% up if compared to the result achieved in 2003.

If we turn to the clean operating income, it reached €2,576m. Up 4.7% on a like-for-like basis.

These results have been obtained thanks to the contribution from the Power Generation, the transmissional gas expansion and the transportation abroad, which more than offset the competitive pressure we are facing in Italy and the less favorable market scenario.

Let's now turn to the R&M sector. The third quarter 2004 reported operating income totaled €247m. Up 63.6% versus the 2003 result due to the strong increase of the contribution of the refining activities related to the high level of refining margins and to higher processing in our own refineries.

Such effects were partially compensated by lower results of the marketing activity in Italy and in other European regions, mainly related to still depressed marketing margins and to higher royalties paid to highway companies in Italy.

For the first 9 months of 2004, the R&M operating income reached €555m. Up by 16.6% from the corresponded period of 2003. The result was achieved thanks to the higher refining margins and to the higher premium for the conversion.

These positive effects were partially mitigated by the euro appreciation over the dollar and the lower contribution from the marketing activities.

Let's now have a look at the other businesses. The third quarter of 2004, the Petrochemical business in [indiscernible] posted an operating income of €68m compared to the operating loss of more than €60m in the same period of 2003. The result was due to the increase in unit margins in base chemicals. In particular, aromatics and polyethylenes, the ongoing rationalization process and the efficiency recovered.

The third quarter 2004, the Oilfield Services and Engineering reported operating income amounted to €48m with a 40.7% decrease if compared to the same period of 2003 mainly as a result of the lower contribution from the Engineering activity and is projected a negative result operating costs.

The third quarter 2004, a €66m operating loss in other activities is related to the €74m negative result.

Lastly, the corporate activities reported an operating loss of €85m compared to the overall consolidated result in first quarter 2004 of €65m in 2000.

As far as investments are concerned, ENI capital expenditure for the third quarter amounted to €1.8b, of which 94% were concentrated in the core business. Particular, €1.1b (67%) were invested in the upstream sector and €321m (19%) in the Gas and Power business.

The first 9 months of 2004 the CapEx was around €5.5m with a decrease of around 11% if compared to the same period of last year. This CapEx profile is in line with our forecast for the full year 2004 when we expect to post overall CapEx in the range of €8b.

Before opening the Q&A session, I would like to comment on the net debt and gearing. Net debt at September 2004 amounted to €11.2b. Around €1.6b lower if compared to the June end period and around €2.4b lower if compared to the 2003 year-end figures.

The decrease from first half level is mainly a consequence of the strong cash generating operating activities and the cash in deriving mainly from the downstream disposal of assets in Brazil and the upstream portfolio rationalization.

Our debt to equity ratio decreased to 0.36 in comparison with the 0.48 2003 year-end figure and the 0.43 at the end of June.

Thank you for listening. As usual, here with us today are also the General Managers heads of the 3 business divisions. Stefano Cao, Luciano Sgubini and Angelo Taraborrelli and we all would be pleased to answer any questions you may have.

Hello. Tim.

[OPERATOR INSTRUCTIONS]. Okay. Your first question comes through from the line of Jeremy Elden from Lehman Brothers. Please go ahead with your question.

Good afternoon gentlemen. Could I just ask 2 small questions? Firstly, can you give us any numbers on how much production you’ve sold that we should bear in mind when looking at the third quarter versus third quarter production comparisons? And how much sales proceeds from that sale of production has been so far?

Jeremy, this is Stefano.

Hi.

Production [indiscernible]. It was related to the production [indiscernible]. I'm sorry, I'm coming Jeremy.

Thanks.

Well plus giving you the proceeds from the production sold, in terms of oil dollar per barrel on the quarter, third quarter 2004, the oil has been at $38.6 per barrel.

In terms of gas production, in terms of dollar, [per minimum] btu would have been on the oil portfolio $4 per million btu.

Right. Guys didn’t make myself very clear. Sorry. What I meant was how much daily production have you disposed of with your asset sales and what was the sort of proceeds from the asset sales? I'm looking at the year-on-year production growth.

Okay. In production sold yes it was -- in terms of production okay in the third quarter we have completed a disposal of our interest in Gabon and the disposal of our asset in UK B Block and C Block. The impact on the third quarter comes from the asset disposed overall in 2004 is 16,000 boe per day. The cumulative since we started the process of selling some of our assets, which has started from 2002, and projected today is 70,000 boe per day.

Brilliant and can you -- do you have any sense of what the disposal proceeds have been from either the 16 or the 70?

On the gas -- UK is 168m and about 12m. So 180m is to the disposal of these 2 assets.

Right. Was that dollars or euros?

These are euros. Always converted in our currency.

Right. Thanks very much gents.

Okay. Thank you. Our next question comes through from the line of Neil McMahon from Sanford Bernstein. Please go ahead with your question.

Hi, I've got 2 questions. First of all, your initial comments around being under valued seems to have had some impact given the fact that the corporate governance of the Company maybe in question because of the holding by the government of some 30%. Maybe you want to comment on the fact that the under valuation could be due to the government’s stake in the Company?

Secondly, just wanted to talk about Kashagan. You do say things are going to plan there, yet has there been any talk of renegotiation in the original OKIOK agreement?

Secondly, in terms of the longer term pipeline development for exports of the oil, have you had any update in terms of routes and options that you would like to pursue there? And does having Exxon Mobile and Koninklijke Philips in the joint venture impact where that route can go?

Listen. This is Marco speaking. As regards the possible under valuation because of the presence of the government, I think this might have been an element of concern for the investment community in 1998, or maybe in the very, very first years of our implementation. But I think that everybody has acknowledged the behavior of the majority shareholders which behave as any other shareholder. So today, after let me say almost 10 years of this kind of behavior, I wouldn’t think that an element which is causing the under valuation which Vittorio mentioned can be attributed to the presence of the government.

I then ask Vittorio to answer the second question.

Kashagan, the first question was about the renegotiation from the OKIOK sign. Surely you remember that in connection with the approval of the development which took place in February this year, there were also a number of modification to the production sharing contract. You probably remember the comment at the time is that we will not consider and still today we do not consider those modifications as materially affecting the expectations from the project. And since, there has not been any renegotiation and we don’t expect to have any renegotiation.

I don’t know whether you are referring to the possible disposal of the BG’s share in the province. This is [influencing] and the possibility that the share is either totally or partially taken by the republic. I can tell you that of course that will be participation -- be direct participation of the republic into the venture that would call for a number, I would say, minor adjustments to the PSA. But really nothing touchy that related to value.

In terms of in pipeline growth, you know that our general philosophy as a consortium, indeed as an operator of the consortium is that eventually we shall have a number of different alternative routes. What we are doing at the moment, we are concentrating on the pipeline which is required to have the possibility of exporting the early production via the BTC pipeline. This is the line from [Acitcal] to Baku. Then the what is envisaged is a transportation across the Caspian via barges or boats, unloading and feeding through the BTC utilizing the capacity which is already in control of some of the partners of the consortium.

You referred to whether there will be any limitation in having Exxon and US companies into the venture. Amongst the various alternatives for the pipeline, of course there is a further alternative which would imply the utilization of an Iranian route. Kashagan is a long lasting project. Should there be the political situation for considering also this possibility for operating part of the oil from Kashagan we will consider at that time. Certainly not now.

Great. Thank you very much.

Okay. Thank you. Our next question comes through from the line of Alastair Syme from Merrill Lynch UK. Please go ahead with your question.

Yes good afternoon gentlemen. It’s Alastair Syme, Merrills. I think it is a question for Marco just on slide 17 on the net financial debt. That gearing that you quote, 36%, can you confirm if that is pre or post tax under the way that the Italian tax structure works? And it would also be quite helpful if you could mention what the disposal proceeds were from selling Brazilian downstream?

Yes, listen the gearing is post tax.

As regard the proceeds from the sale of the Brazilian activities, we are in the range of €370b. Million. Sorry, not billion – million, million.

Great. Okay. So you've basically pro formed for the tax payment that will come out in the fourth quarter and run into the first?

Pardon me?

You’ve pro formed for the tax payment that will come out on the fourth quarter?

Yes.

Yes. Okay. Perfect. Thank you.

Okay. Thank you. Our next question comes through from the line of Irene Himona from Merrill Lynch. Sorry, Morgan Stanley. Apologies. Please go ahead with your question.

Yes hello everyone. I had a question concerning volumes in the fourth quarter and year-end gearing. Assuming we remain at $44, what guidance would you give us on Q4 volumes and gearing?

And secondly, a question going back to Mr. Mincato’s opening statement. Can I ask you sir are you actually proposing an increase in the 2004 dividend and are you proposing a share buyback this year? Thank you.

Listen, as regards the projection of the gearing and of the debt at year-end, the debt should be with the assumption of about $44, the debt should be a little less than that. It should be a little bit more than that. In the range of 11.8, 11.9 net debt. While as regards the gearing should remain at the same level.

Irene, you tried to cause me to anticipate about any possible change in dividend and share buyback policy throughout the 4 days we spent in Libya and [indiscernible]. I think that what Vittorio said right now is even something more than you could have expected.

Thank you.

Okay. Thank you. Our next question comes through from the line of--

One second. We’re still missing the answer on the -- in terms of production for the final quarter, pretty much depends on what is going to be the average of the oil price. We foresee a situation at this stage whereby we maintain -- actually we go beyond the 5% target for the year but before the curtailment caused by the PSA effect. So before the PSA effect it would be in excess of 6%. So we anticipate after we should remain in the range of about 4% growth.

Thank you.

Okay. Thank you. Our next question comes through from the line of Nick Griffin from CSFB. Sorry, Deutsche Bank. Please go ahead with your question.

Yes, Deutsche Bank at the moment. I promise I won't ask a question on buybacks and that was my question. My other question, just could you quickly explain to us why the interest charge was so low this quarter and is that an ongoing effect?

And I suppose my second question is just in regards to some comments that we've had re Yukos and an extension of ration comments. I know you’ve ruled out any potential deal with BNI. Looking at Yukos, could you potentially rule out any potential view of ENI looking at the assets of Yukos as in gas once that situation is eventually resolved?

Listen the reduction in the financial charges is mainly due to the reduction of the average debt throughout the year. That’s the main reason.

As regard the indication given about Yukos, I wouldn’t add anything to what already Vittorio said. You know that our preference has always been 2 assets rather than 2 corporates. But I do not make any specific reference to Yukos, [indiscernible] or someone -- some other Russian company assets at all.

Okay. Thanks very much.

Okay. Thank you. Our next question comes through from the line of Edwin Rigg from CSFB. Please go ahead with your question.

It’s Ed Westlake at CSFB. I have 2 questions. The first 1 is just around CapEx, including financial investments about 5.6. I mean obviously the dollar is helping on translation effects. But still seems a little light against the 8 for the full year. Could you just give us an update on where you expect to come out and perhaps reconfirm the CapEx for next year?

Then the second question is around Gas and Power. If I just keep Snam Rete Gas on the new disclosure flat and power flat, a little bit perhaps of an increase in transport with the Green Stream pipeline on stream, then you know the marketing and distribution number has to sort of fall quite substantially in Q4 in order to his the €3.5b. I mean is there room for increasing that number at this stage?

Listen Ed, yes I think we've mentioned that already. But if I missed it, as regards the expected overall amount of CapEx, yes definitely we are still projecting something very, very close. And it still could be 8, 8.1. But that’s the order of magnitude of the expected CapEx amount for the full 2004 year.

This Sgubini speaking here. As far as the second question relating to the Gas and Power, I would like to say that third quarter -- the fourth quarter will be characterized by different elements. The first one is that the positive effect of the exchange ratios that we had last we are going to lose last quarter this year.

Secondly, we are going, or we have renegotiated at the end of September beginning of October the majority of our contracts and due to the higher competition, we expect a reduction of several margins. [Indiscernible] is another element that the temperature situation that we had last October reduced the volume being sold.

So these 3 elements are not giving any chance to increase the number that you have in mind.

Ed, it’s Marco again. I didn’t answer. I don’t want you to think that I didn’t. Actually didn’t. I just forgot to answer about the guidance on the 2005 investments. But the answer is that we are presently drafting the 2005/2008 4 year plan and so today I could only confirm what we already told you. So I think this it is not something.

Thank you.

Okay. Thank you. Our next question comes through from the line from Huw Williams from Cazenove. Please go ahead with your question.

Yes I've got 1 question on the downstream business. You said you were aware of the strength in refining during the quarter. Maybe you could give us a feel for just how tough it is in marketing going through the quarter and also looking into quarter four? Maybe also giving a view on how you think marketing will go into 2005? In addition to that, maybe you could just give us a view on what the current progress is, or situation is, on the proposed sell down of the IP station and chain please?

Okay, as far as the margin in the fourth quarter is concerned, we expect a lower margin. Maybe higher than the 1 we got in the third quarter. Operating margin is very good, but we cannot expect that it will remain at the same level during this quarter.

Much of the prospect of the margin will depend on the price level. The higher the price in our assessment, the lower the margin of course because we find it is very difficult to transfer any price increase to the final consumer.

In 2005, basically we expect the same situation. The margin level will depend for the most on the price level.

And as far IP is -- the IP sale is concerned, we have a first deadline on November 19 where we should receive the interest by from potential buyers. Then by the end of the year we should receive the final offer and then we should start negotiations with the potential buyers.

There is a strong interest in the market of course and we expect to close the entire process, the whole process by the end of the first quarter of next year.

That’s great. Thanks.

Thank you. Our next question comes through from the line of Neill Morton from DRkW. Please go ahead with your question.

Good afternoon gentlemen. Wanted to pick up on a comment you made at the press conference on the dividend. I know that [Vitale] has moved to interim dividend. You are the last of the big companies to pay annually. Given the size of your dividend and the trading volatility around the time it is paid in June, I wondered if there is actually preventing you from going to sort of multi-payments through the year?

Listen. At this point we can't envisage any different way to pay the dividend which will be brought about by the Board February.

But there is nothing in corporate law, or your Articles of Association that prevents you from--?

No. No, sorry. No, no, from that point of view there is nothing which would forbid it.

Okay. Thank you.

Okay. Thank you. Our next question comes through from the line of David Thomas from Commerzbank. Please go ahead with your question.

Yes good afternoon gentlemen. A couple of questions please. Firstly on CapEx. Can you just confirm what the trend of CapEx is going to be out to 2007 in your plan period? I believe it’s €25b in total, €15b in ’04 and ’05. And also within that, what the trend is for E&P in particular?

The second question is back on the question of buybacks. Let's just say what you have done year-to-date and if you can't say, when will you actually announce what year-to-date buybacks you’ve done, if any?

As regard the CapEx profile, it is well it is confirmed the amount of the investment of €25.5b. But as I was saying before, I wonder if it is worthwhile taking it into consideration since we are now elaborating and approving a new 4 year’s plan which might change it.

The other question was?

Buybacks.

Relevant to the buyback. I would like to find out what did you ask? What was the amount which we--?

The amount in euro terms of buyback year-to-date and if you can't actually say what that is at the moment, when will you actually reveal what that amount is?

Well the overall amount is €5.4b which was the amount approved by the General Meeting which, for the first time, approved the loans of the share buyback exercise.

That’s through to the end of 2005 I believe?

No, no, there is no deadline. The end of 2005 is just a fact that our General Meeting approves let me say on a yearly basis the renewal of the program. But it is not that we think that we have to buy.

Right okay. Back to the CapEx question again if I may? I may just need to rephrase it which is 2006 and 2007 CapEx, can you just say what those numbers are because I believe you said €25.5b and from what you're saying it may be that you're looking to change that. Is that correct?

No. What I'm saying is that we are now drafting a new 4 year plan whereby the first year will be 2005 and that the CapEx profile as many other items might change even if it’s in the nature of things that the new program will be consistent with the preceding strategy which has been announced.

That’s fine. I’ll obviously have to exercise some patience. Thank you.

Yes. Do your best. We will try to do our best to.

Okay. Thank you. Our next question comes through from the line of Sven DelPozzo from John S. Herold. Please go ahead with your question.

Good afternoon gentlemen. My question is for Mr. Sgubini. I would like to know Bluestream project projected sales volumes for 2005 and 2006 and if possible may I have a rough indication of what operating income might be related to those sales?

Well the project of Blue Stream is a little up on the volume that we sold in Turkey is in line with the contract that we have. So the margin, we don’t have any variation in the contracts. So it’s the original margin because the contract is between Gazprom and ourselves and [indiscernible]. So the contract has been already -- the original contract. There is no addition.

Would you be able to remind me of those figures at this time?

At this moment I have to check. I don’t have it with me at this moment.

Alright. In reference to -- in the upstream, in reference to your comments about interest in unconventional resources, would you care to define what type of unconventional resources you might be interested in?

Yes. I think there was a clear mention of heavy oil or paraffin. You know that we have a good position in Venezuela and we are trying to leverage on that position when the right time comes so that we can have our share in the project on the heavy oil. In general terms, we are also interested in looking at unconventional things such as the power sales. And you probably remember that we have also entered in terms of R&D developments, we are working on a development project for AGTM – gas to liquid. So that might be, although in a longer time span, there might be another unconventional source for our future development.

Alright. Thank you.

Listen, maybe I can help you just to make things easier for you to go back to the figures which we gave in February about the CapEx profile. In 2005 we anticipate that the 7 takes for 2006 and about 5 for 2007, which added to the about 80 which we commented before which are confirmed for the year 2004 leading to that about €25b which you mentioned before and correctly recorded.

Okay. Thank you. Our next question comes through from the line of Mark Hume from JP Morgan. Please go ahead with your question.

Good afternoon gentlemen. I may have misheard Mr. Mincato’s initial comments regarding your desire to double any capitalization. I really just wanted to understand what the motivation behind this desire to double in size was? That is, is to prevent takeover, or is it increase shareholder value?

I think that there was no exercise of defense at all. It was an acknowledgement of what is considered for the reason which also Vittorio made a reference to of the reported under valuation of our shares. For the reasons again which mentioned. In other words the perspective of growth in our core business, the quality of the upstream portfolio. If you let us add also the capacity shown so far to deliver on the important strategic target and also what the announced growth strategy for the future should imply.

That was the reasoning behind this statement that we consider our Company under valued.

Okay. So it would be fair to assume that this growth would be organically motivated then?

Absolutely. That is what has been said on several occasions. What we are saying is starting from the last 4 year plan presentation is that in the years to come, the target is to grow at 5% in terms of production via internal line.

Okay and that would be over the sort of 2005, 2008, 2010 timeframe?

2 phrases. Sorry I don’t. Say again.

I beg your pardon. That would be over the 2005 to 2010, or 2009 timeframe which you hope could achieve this doubling?

It is the period during which we have announced that we should be in the position to grow at 5% is the 4 year period from 2004 up to 2007.

So yes okay. That’s fine. Thank you.

We have room for the last question if we have a final question.

Okay yes. The next question we have through is from the line of Mr. Iain Reid from UBS. Please go ahead with your question.

Good afternoon gentlemen. It’s Iain Reid here, UBS. Firstly a question on Kashagan. I wonder if you could say when you think the government is going to acquire BG’s stake and therefore what is the timing on you then preempting the remaining stake if they don’t take up the whole stake?

And secondly, a question on production guidance for ’05. You’ve obviously got a lot of projects coming on stream toward the end of ’04 and it would seem that production growth in ’05 is going to be probably higher than your long-term forecast. I wonder whether you would give us a just a little bit of guidance on what that might be?

Okay as far as Kashagan in particular, as far as the process of disposal by BG of their 16.6% stake. You know that the other partners, including ENI, we have decided to preempt the process and the operation has not been concluded yet and for a number of normal bureaucratic reasons. But also because the public expressed the wish for acquiring all or part of the BG stake. So what is ongoing at the moment is an intense negotiation where on 1 side there are the partners in the Kashagan consortium and on the other side, there is the public. There have been a number of meetings. The latest was November 4 in London. In London the Ministry of Mineral Resources conducted by Mrs. [Kolnicka] confirmed the willingness of the republic to acquire a share in the project.

How long that is going to take? That is very difficult to say. The only comment is that the process is ongoing at the moment and what we can add is as we have declared a number of times, we are willing to welcome the participation of the republic as formerly evidenced in a number of countries where we operate around the world. I think that the news will be made known when the deal will be concluded.

Do you have any idea what share of the stake they're after Stefano?

As I said 16.6% is the whole share. The republic declared that they are interested. They have not declared their interest in how much. But the total can be half or it. It can be one quarter, it can be any share. That has not been agreed yet.

In terms of production guidance for 2005, for the fourth quarter 2005. The guidance for 2005 we expect the production growth to be all in line with the 5% growth which we announced with the only proviso that will be growth which takes into account the effect of the BSE. So we will have to see what is going to be the profile of the Brent during the course of 2005. In general terms, you know if you look at the figure based on the Brent which we were expecting at the time of issuing our latest 4 year plan, you are right that we were expecting in 2005 a growth in excess of the average of 5%.

There are 2 additional guys waiting for asking. Please give them the floor.

Okay. Thank you. We do have a question through from the line of Barry MacCarthy from Exane. Please go ahead with your question.

Thank you. Can you hear me?

Yes.

2 questions. The Snam Rete impact you mentioned negative impact from contract. Is that a once off effect or are we going to see that in subsequent quarters? And just a quick second question on Petrochemicals. Much stronger than I had anticipated. How is trading going so far in the fourth quarter? Can we also expect that strong result to continue? Thank you.

Listen as regards Snam Rete that will be a one off. I mean the consequence of let me say poorer than expected results from the 1 located in Brazil and the other 1 in South [indiscernible]. I mean we expected these things to be recurrent.

As regard the present performance of the Petrochemical sector, let's keep fingers crossed. The situation in the first 40 days, 45 days of the [indiscernible] is in line with the performance of the third one.

Okay. Alright. Thank you for that.

You're welcome Barry.

Thank you and the last question I have in queue is from the line of Jason Kenney from ING Financial Markets. Please go ahead with your question.

Kenney from ING. Just a quick question on the North Sea decline. 11% year-on-year. Is that something I should extrapolate going forward, or are you potentially looking at another A&P acquisition in that province further out? It seems to have done you some good in the past.

Secondly, on your wider portfolio. A number of peripheral assets such as things like Croatia and maybe places to build such as Pakistan. Could we see more acquisitions of a smaller target in the near future?

Okay. In terms of the decline on the North Sea, of course you are referring to the decline in UK petrol sources. In terms of the existing portfolio, this is a decline which we indeed expect.

The issue of the acquisition is something which we might treat it as a completely separate issue than an opportunity come and of course the impact will have to be measured at the time.

In terms of the peripheral assets you mentioned – Croatia. You should look Croatia as pretty much connected to Italy and to Italian gas market. So we manage Croatia as an extension of Italy. So we don’t think that we really need to grow there because in terms of materiality which is related to the proximity with Italy.

In terms of Pakistan or other areas, we are working on our portfolio and the growth which we expect is the growth based on development of projects. And then particularly, we reckon that 2007 in production in Pakistan will reach a level of 55, about 55,000 boe in terms of, of course, equity.

Great. Thanks.

Thank you to everybody and good evening.