埃尼石油 (E) 2005 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to your ENI 2005 Third Quarter Results with Mr. Marco Mangiagalli, Chief Financial Officer. My name is John, and I will be your coordinator for today's conference. [OPERATOR INSTRUCTIONS].

Thank you, good afternoon ladies and gentlemen and welcome to this conference call in which we will comment on the 2005 third quarter results and business trends.

Today we report strong financial results in the core business thanks to Eni's robust industrial performance and the positive trading environment. The price of oil reached new nominal highs in the third quarter 2005, averaging $61.5 per barrel, up 48% if compared to the same period of last year.

Refining margins was significantly higher on a like-for-like basis as increasing demand for like products and large extreme outages in the Gulf of Mexico continued to put the global refining capacity under pressure. In particular, the average European refining margin was around $7 per barrel up 64% compared to the same period of last year.

Finally, the euro/dollar exchange rate remained substantially stable. As usual I would like to remind you that Eni results are affected by several issues including the seasonal factor affecting the demand for natural gas and petroleum products pertaining to residential heating. The demand for which is highest in the first quarter of the year being the coldest months, and lowest in the third quarter being the warmest months.

Therefore, Eni's operating profit and change in net debt in the first nine months cannot be extrapolated for the full year. In the third quarter the net profit amounted to €2.34b with an increase of around 48% which compared to the same period of 2004.

Excluding special items and inventory gains the adjusted net profit totaled €2.45b with an increase of around 69%. Such a strong performance is the result of a 55% increase in the operating result mainly as a consequence of the strong performance in the upstream and the R&M, and an income growth from investments for €145m. Mainly related to the higher contribution of gas and power up periods accounted for all in the computing method mainly GAAP.

The positive effects were partially offset by higher taxes amounting to around £640m and related to the higher taxable income. In the first nine months of 2005 reported and adjusted net profit amounted to €6.7m and €6.9m respectively. An increase versus the same period of 2004 or was up 35% on a reported basis and around 54% on an adjusted basis.

In the third quarter of 2005 reported and adjusted EPS made on an average number of shares totaled 3.66, 3.76b highlighted in euro. An increase of 48% and 69% respectively which compared with the June period of last year. Almost the same increases were accounted in dollars.

As to the cash flow per share in euro, we can see an increase of 41% on a reported basis, and of more than 48% on an adjusted basis. Again in dollars the increase is almost the same amount.

Leveraging on the robust industrial performance and on the positive market environment the third quarter reported operating profit amounting to €4.2b with a 44% increase versus the corresponding period of 2004.

Excluding net negative special items for around €700m and inventory gains for €505m mainly related to the R&M, the third quarter 2005 adjusted operating profit totaled €4.4b. Up 55% on a like-for-like basis. And we need to remark that the third quarter 2004 operating income was affected by net negative special items for €84m. This was mainly due to provisions for environmental laws in the commissions in the R&M and corporate sectors as well as asset write-downs in the other activities partially compensated for by gains on asset disposal in the E&P.

In addition we also accounted €177m for inventory gains, mainly in R&M. The impact of the euro appreciation versus the U.S. dollar in the third quarter of 2005 has been negligible. The adjusted operating profit for the first nine months of 2005 totaled €12.4b, up 45% versus the same period of 2004.

If we add the effect of the euro appreciation versus the U.S. dollar amount into around €300m in the first nine months of 2005. the increase in the adjusted operating profit of 2004 would be nearing 49%.

Let me now go into more detail for each business. In the Upstream sector Eni showed an impressive production increase confirming the positive trend recorded in the past months. In the third quarter of 2005 hydrocarbon production totaled 1,715,000 boe per day, an increase of 11% versus the corresponding period in 2004.

Excluding the impact of the higher price on the PSA and buyback contract, the production growth rate is up 13.6%. The impact has been calculated from cheaper that in the current point price scenario. The sensitivity for $1 change in the Brent results in a reduction of about 2,000 boe per day in our equity production.

Let me remind you that our previous guidance for 2005 for a 1,000 boe per day reduction for each $1 change was based on a Brent price of $30 per barrel which was our budget price.

The third quarter 2005 production growth is entirely organic and has been achieved thanks to the step up of Kizomba B Angola and Bahr Essalam in Libya as well as the field ramp ups in Libya, Wafa, Iran South Pars 4 and 5, Algeria Rod, Angola Kizomba A and Egypt. The positive effects were partially offset by the decline of mature fields in the U.K. and in Italy. Asset rationalization in the period bounced between 1 kboe per day as well as by the outages in the Gulf of Mexico which accounted for around 10,000 boe per day. The growth rate is even faster than the one accounted for in the first case, a remarkable result achieved within the scenario marked by new rate costs in all class.

In the first nine months of 2005 hydrocarbon production reached 1,714 kboe per day, up 73% versus 1 year ago. Before the impact of a higher price on the PSA and buyback contracts increase in production is up 9.4%. This trend represents a solid base for a robust production growth rate for the full year.

The third quarter reported operating profit in the upstream amounted to €3.7b with a 51% increase if compared with the corresponding period of 2004. The result includes a net negative special item for €132m mainly related to asset write-down. On the adjusted basis the operating profit amounted to €3.8b showing a marked increase of more than 67% on a like-for-like basis.

The strong operating profit is mainly related to higher hydrocarbon realization prices denominated in U.S. dollars following the positive oil market scenario and higher hydrocarbon production sold. These positive effects were partially offset by higher operating costs, and DD&A.

If you turn to the first nine months, the reported operating profit reached €9b, up 61, 62% versus the same period of 2004. Excluding special items, the increase is in the range of 60% within operating adjusted profit reaching €9.3b.

As for the Gas & Power business, the overall gas volumes sold both consolidated and associated rose by more than 10% in the third quarter of 2005 reaching around 17b cubic meters. This increase comes from both our cities in Italy and abroad. In particular, in the domestic market gas sales increased by more than 17% as a result of higher volumes sold between gas and thermoelectric customers as well as higher surge consumption mainly related to differentiation in power Gen activity. These positive elements were partially offset by lower sales to wholesales. And without considering self-consumption, Eni's sales in third quarter 2005 were up by 9%.

In this period the gas demand in Italy confirmed the dynamic trend with an increase of around 6% if compared with the third quarter 2004 sustained by gas consumption in the thermoelectric sector.

International sales grew by around 5% reaching 5.9 bcm in the third quarter 2005 mainly as a result of higher gas sales to the Blue Stream and Greenstream pipeline. In the first nine months of 2005 the overall sales and gas demand reached approximately 59.5 bcm with an increase in the range of 5%. In the same period in domestic gas sales increase by 4.6% also blamed for the self-consumption in power generation.

On the other hand, international gas sales in the first nine months of 2005 totaled 23.5 bcm, up by around 9% versus the same period of 2004 thanks to higher sales in Spain, France, Germany, and [inaudible]. These results in the Gas & Power business are fully in line with our forecast for the year.

Turning to the results of the Gas & Power business, the third quarter reported operating profit amounted to €525m. 25% up if compared to €433m accounted for in 2004. The third quarter results include negligible negative special items as well as €65m for inventory gains. The Gas & Power adjusted operating profit amounted to €468m with a 3.8% increase over the same period of 2004.

These results have been affected by an €114m estimated provision for the first nine months of 2005 due to probable enforcement of authority resolution number 248 which rules out different mechanics from the adjustment of the gas prices to changes in energy parameters.

In the first nine months of 2005, reported operating profit reached €2.7m, up 5.1% if compared to the adjusted achieved in 2004 which compared to the adjusted operating profit reached €2.64m, up 12% on a like-for-like basis.

Let me comment more extensively on the Gas & Power third quarter 2005 adjusted operating profit by activity areas on a pro forma basis. The marketing and distribution activities pro forma adjusted operating profit achieved before the provision of 97m related to the authority resolution, commented above, irrelevant to the first half 2005. This analysis gives a much clearer view of the industrial trends occurred in the Gas & Power business in the third quarter 2005.

The result in market and distribution activities shows an increase of around €20m as a consequence of higher volumes sold in Italy and abroad which more than offsets the lower margins due to competition as well as an effect on the provision posted for the authority resolution and relevant to the third quarter 2005 which amounts to about €17m.

In transportation activities the adjusted operating result showed an increase both abroad and in Italy as a result of higher volumes transported. The higher contribution of the power generation business is due to the increase of electricity production sold thanks to the test production of the Mantova plant and the start up of the first unit in the [Brent] plant.

Let's now turn to the R&M sector. For third quarter 2005 reported operating profit totaled €663m, up 109% versus the same period of 2004. The result includes negative special items for €115m mainly related to provisions for rates and contingencies relevant to environmental laws inside the Commission. In addition we also accounted for €428m for inventory gains.

On an adjusted basis operating profit amounted to around €350m showing an increase of 39% over the same period of 2004. The result was achieved thanks to the strong increase in refining activities in Italy and abroad. A consequence of the high levels reached the refining markets.

These positive elements were partially offset by the lower contribution of marketing activities in Italy as a consequence of poorer margins due the rise of supply cost for raw products and lower volumes sold related to the weak demand trend in Italy. On top of that it's worth saying that starting from the beginning of September we have reconsolidated the IP brand service station.

If we turn to the first 9 months the reported operating profit reached €1.5b, up by 106% versus the same period of 2004. Excluding net negative special items for around €200m and inventory gains, the increase is more than 53% with the operating adjusted profit reaching more than €800m.

Let's now look to the other business. In the third quarter of 2005 the Petrochemical business, namely, Polimere Europa reported an adjusted operating loss of €43m compared to the €74m of operating profit in the same periods of 2004 relating to the decrease in base chemical margins as a result of the increasing feedstock costs not transferred to save prices.

In the third quarter 2005 €106m adjusted operating loss and other activities that now includes non-productive is mainly related to pursue the €95m negative result. The reported result was affected by negative special items for €283m mainly related to provisions for environmental laws, asset write-downs inside the commissioning in [indiscernible].

Lastly, corporate activities posted an adjusted operating loss of €70m. Significantly improving the operating consolidated loss of the third quarter 2004. The reported result was affected by special items for €123m mainly related to provision for the risk reserve.

Let's have a look at CapEx now. The third quarter 2005 CapEx amounted to €1.66b. 3% down on a like-for-like basis. Around 96% of capital investments were concentrated in the core business. In particular €1.2b were invested in the Upstream sector, up by around 8% due to the cash out related to the exploration acquisitions in Nigeria and Alaska. In the Gas and Power division, €220m were invested with returns of more 30% mainly due to the completion of the Greenstream pipeline and upstream power plant.

In the first nine months of 2005 capital expenditures amounted to €4.7b with a decrease of around 12% if compared to the same period of last year when they were at €5.4b. This was mainly due to lower expenditures in the Upstream business as a result of the completion of important projects in Iran and Libya. And in the Gas & Power due as mentioned before to the completion of the Greenstream project industrial power generation plant.

A decrease of the CapEx is also as a result of the euro appreciation versus the U.S. dollar which accounted for around €40m. This CapEx profile is in line with our forecast for the full year 2005 in which we expect the growth in a nominal amount in the range of €7.5b.

The total investment in the nine months of 2005 were €4.8b with a 14% decrease compared to the same period of 2004. On top of this, in the first nine months of 2005, we bought back 12m shares for an amount equal to €241m.

Finally I would like to comment on the net debt and gearage. Net debt as of September 2005 amounted to €6.4b. Around €3.1b lower if compared to June end of year as a consequence of strong cash generation due in the third quarter and the cash from asset disposal mainly relating to the IP brand disposal. The cash generated was invested in the core business. The debt-to-equity ratio decreased to 0.16 compared with 0.26 June end period. But nevertheless we're saying that in October we paid around €1.7m in the 2005 interim dividend and we bought back our shares for a nominal amount of €467m, bringing the overall 2005 year-to-date cash distribution to our shareholders to around €5.8b.

Thanks for your attention and we are now pleased to answer any question you may have.

Thank you, ladies and gentlemen, your question-and-answer session has now started. [OPERATOR INSTRUCTIONS]. And the first question we have this afternoon comes through from the line of Mr. Huw Williams of Cazenove. Please go ahead with your question.

Marco, hi. It's Huw Williams here from Cazenove in London. Two quick questions, firstly on the Gas business and then secondly on the tax side. Firstly on the Gas business, can you just give us a bit more color on the provision for the pricing settlement which you discussed which impacted the Q3 numbers and how much of an impact that could have in Q4 as well, and whether the situation will be resolved as I think you're going through a legal process on that one?

Secondly, to do with the Snam dividend policy. It looks like from the Snam figures yesterday that you actually -- they were in fact guiding down on dividend payout for the next year. Roughly have already have spent, already issued a special dividend back in September. I just wondered whether there had been some change in the Snam approach to its dividend in the last few months?

And then final question is on the tax charge. Whether you can give us some guidance for tax charge into Q4 please?

Yes, Huw, I will try to answer at least two of your questions being sort of relevant to Snam. I think pricing I think should be more probably addressed to them. Anyway, as regard to the first question which as I understand refers to the mention which I made to the resolution number 248A which was adopted by the authority, I think that is something which deserves a little bit of elaboration. And I have to make reference to this resolution which in January 2005 we defined the inefficient system of the maximum price to small consumers. Those who are consuming less 200,000 cubic meters. The most important change and introduction of a clause which reduces by 25% the price of the action toward products' price variation when all prices are higher than $35 per barrel. The goal is evidently trying to remove a little bit of the impact of the change in [personnel].

The resolution across vis-à-vis the city gas, syndicate gas price from wholesalers to end users sellers should be coherent with the new price. Evidently as you said Eni and several other natural gas sellers appealed to the regional court against this resolution. And on the July 28, the regional court cancelled the resolution adopted by the authority for excess of power and lack of examination.

But the authority made an appeal on the Council of State which on the October 14 suspended the revision taken by the regional court and the final decision of the [Consuel de Stat] or the Council of State is still not yet scheduled. We expect it to occur in January 2006. So in fact the authority resolution is still in place.

We have given to the authority all the evidences necessary to justify a revision of the resolution which we're commented so far, the 248. Therefore we are confident that all through the case of an adverse decision of the Council of State regarding the extension of the authority powers we would have anyway a revision of the resolution 204 or sorry 248 and the more favorable price system.

Therefore any resolution of the economic impact on the Gas & Power division is or about €250m for the whole 2005 year. But only for 2005. For 2006 we are not now in a position to quantify a precise amount of the provision. Even both, therefore seeing possible revision of the resolution and also, of course, some business action that we are figuring out to put in place through the coming months. I think I gave you a sufficiently clear picture of the situation we are presently facing versus this authority resolution.

As regard the tax rate use I think that for the full year you should not expect a major change from the one -- from the tax rate in which you have seen at the end of the third quarter.

Great, thank you very much. And just quickly as a follow on for that gas pricing decision or outcome, although I realize you can't really give us a clear view on what's clearly possible for '06. But just to clarify, I mean with oil prices where they are would that imply the potential for a higher impact than €250m or would it be lower for '06?

Well, listen I wouldn't say that because the changes occurred in 2005 are not -- have been much realizing in the third quarter substantially. And so what we are not in a position to measure now is how the information which we have provided to the authority will be received by them. So it's not -- it is a matter of pricing scenario. But more than that simply a resolution process that comments can be made on the basis of the impact of the changes of the pricing scenario and the authority will take them into account. Now we have to see how they will react to our comments.

Okay. Thank you.

Thank you for those questions. The next question we have comes through from the line of Mr. Iain Reid of UBS. Please go ahead with your question.

Hello Marco. Two questions please. You mentioned on the E&P Division, you're suffering from higher DD&A operating costs. I just wonder whether you can quantify what the sort of run rate you've seen in terms of increase based on 2004 levels?

And secondly on CapEx, I heard you say that you're reiterating your €7.5b. But you're running at a fairly low rate for the first three quarters compared to that target. I just wonder if you could point to the various items which are going to be spent in the fourth quarter which will bring you up to that level?

As regards to DD&A, Ian, the amount of the DD&A per barrel in the nine months increased around 9% from $5.1 to $5.6 per barrel, adopting a fixed exchange rate of $1.26. And the reasons are both a substantial new production that came on stream carrying recent development investment and additional CapEx spent in mature fields to contract when it's completion. So that has two effects. The new production coming on stream and additional CapEx spend in mature fields.

And as regard possible forward-looking, Iain you know that the DD&A and these ratios are affected by the corrected differentiation of the reserves which can only occur on the December 31. So I would prefer not to comment it.

Anyway, if you want let's say so. This supply it will remain at the current level which are higher than those we saw at the end of 2004. It is reasonable to expect farther increase in the DD&A.

Thanks Marco. Have you got the same analysis for operating costs?

Yes I have. And there maybe I can be a little bit more precise. Operating costs are slightly higher in the nine months if compared to 2004. It's $3.3 versus $3.1 per barrel, with the same exchange rate of $1.26. Again, we expect this guidance for the full 2005 a slight increase in the first -- in the fourth quarter due to cost inflation, maintenance and well operations to support production.

Listen, as regard the CapEx, Iain we are still where we should speak to the 7.5m and we expect a good contribution being at that level rather than the low one which we have been commenting because of the exploration activities in the Republic of Congo and [Tunisia].

Okay. Thanks very much indeed Marco.

Okay. Thank you. Next question we have comes to us from the line of Lucy Haskins of Lehman Brothers. Please go ahead with your question.

Good afternoon and congratulations on a very solid set of figures.

I'm sorry Lucy, I can hardly hear. Could you speak a little bit louder, sorry?

Congratulations on your very good set of figures. Just to follow on the question about taxes, could you give some indication about how your upstream tax rate has moved over the quarter relative to year ago levels?

Yes. You know that in our mix of tax component the upstream is one which is evidently very higher than the average tax rate. In the upstream in fact the overall tax rate is expected to be slightly higher than 50%. Around 50, 53, let's say because of the increasing rate of taxable income coming from international activities.

Because the upstream tax rate in this quarter actually would seem to have been lower than that, is that right?

You know it shouldn't be, it should be always, at least as far as I remember, being 50% is the average tax rate which is experienced in the upstream. But you have to keep in mind Lucy, that across the year it's difficult to have a stable tax rate on a quarterly basis. I mean, I would say that the guidance you should stick to is one for the full year.

Okay. The other issue, perhaps given that you did deliver such very strong profits in this quarter, do you have any plans to make a special distribution to shareholders for the full year?

Listen, I think that Paolo Scaroni commented already on questions about special distribution. This is something which in general terms we do not consider appropriate for oil, integrated oil. And the dividend quality will be decided beginning of next year when the Board will take a decision on that. So it's really too much to ask today about possible change in the dividend policy.

Thanks.

Okay. Thank you for that question. The next question we have comes through from the line of a Mr. Mark Hume of JP Morgan. Please go ahead with your question.

Good afternoon Marco. A couple of questions for you. First of all I'd just like to follow on from Huw’s question in relation to the Gas & Power Division. Just in relation to the guidance. You were maintaining that you could at least keep cash flow generation asset around 2004 levels, out to 2008. And whilst I realize that there are a lot of moving parts in determining that number, are you still comfortable with that target?

Secondly, there was a bit of news spoken concerning the Calik Pipeline. Just wondering if you could elaborate a little bit more there? Will you be, for example, seeking to refine the crude in Turkey given that you've backed out of the two plus option? And more importantly how will this affect your expectations of production build-up in the Caspian and realizations for the crude and liquid volumes coming out of Kazakhstan?

Listen. As regards this issue of cash generation I think having some further evidence I would stick towards we have been saying so far. Maybe we will be in a position some day that on the strategy presentation next February.

As regards the, I think the, very, very recently we take the position, just one hour and go press release about the pipeline in Turkey. What the statement is just that we found an agreement to set up 50/50 company with the Turkish Group Calik [indiscernible] which will be focusing on the basic engineering for the pipeline linking Samsun to Ceyhan. The next step will be the obtaining of the licenses from the Government.

I would stress that in this specific case it would be just one Government involved which is not a marginal effect in this respect. And then we'll begin to work on the economics. No doubt that the initiative is open also, or will be open, also other partners. I would say that all those who have availability of oil in the Central Asian region might be interested in joining us. I am thinking not only through our partner of Kashagan, but even the Russians and any one else, as I was saying before.

So there's no reason that you would necessarily be looking to accelerate volumes from the Caspian Sea, and in fact you would need to have third-party volumes to meet the pipeline economic?

No. This is something which as you may remember was one of the possible routes which had been mentioned when questions came about the acquisition of the affected quarters related only to Kashagan. But this was one of the routes and this just a step forward in that, in preparation.

Okay. Thank you very much Marco.

You're welcome.

Okay. Thank you. The next question we have comes through from the line of Neil Perry of Morgan Stanley. Please go ahead with your question.

Hello Marco. Two quick things, one is perhaps you could give us some guidance on what you are expecting for CapEx during the course of next year?

And secondly, could you at least in just general terms update us on the discussions that you've been having recently with [Gastrom]?

As yes listen, as regards the CapEx for next year it will be a part of the [previous] comment. So I'm sorry, but I'll have to ask you to wait some months and you will have a complete picture for the previous and evidently also from the first year.

As regards the [Gastrom] and recent discussions they are aimed to setup a complete, external framework, of targets crossing over different business not only with respect to natural gas. But also on upstream and downstream in order to have a wider set of arguments to be developed together. So this is what our themes will be concentrating in the next weeks.

It's an evolution of the traditional agreement with [Gastrom] which we are substantially based on natural gas.

And is there are other discussions about gas upstream and downstream outside of Russia?

Well in fact we are at the very, very beginning of the talks. The announcements were made just because they began. So it's -- I could say that there is no conclusion. But there is no specific goal identified yet.

Okay. Thank you very much.

You're welcome.

Thank you. The next question we have comes from the line of Sven Del Pozzo of John S. Herold. Please go ahead with your question.

Good afternoon. And my question relates to I see a decline in the rest of world production. This is even after taking into consideration the delays associated with the Gulf of Mexico hurricanes. In addition BG mentioned something about operational complications in its Caspian operations. I'm wondering whether this has anything to do with Karachaganak, tell me if not, and if not please give me a better indication of why I've seen this decline in the rest of world production a sequential decline from the second quarter to the third quarter?

In fact the reason, the main reason, in fact the one which you mentioned is the carrying out of maintenance activity in the Karachaganak field.

Okay and at the same time I recognize that the volumes attributable to production sharing agreement has declined in the third quarter versus the second quarter despite having higher international prices. Is this also due to maintenance at the Karachaganak field?

No listen. If you are making reference to the fact that we have now given a guidance to the guidance of the -- regards the sensitivity of our portfolios of production to oil price changes, it has nothing to do with Karachaganak. Now we have said that very soon should be 4,000 barrels per dollar shift which we have been giving so far on the basis of an oil price of $30 boe which was the price on which we made our automatic price measuring the impact of the shift in the price is in each single contract. Now having revised that exercise, under the present price we have realized that the impact is in the range of 2,000 boe per each single dollar shift.

So this is as, far as the year 2005 is concerned, the best indication to be received. We think we'll be able to be in a position to give guidance for the years to come next February when this impact from PSA contract will be a part of the full-year's plan.

And then my last question. Just sequentially again, in the third quarter I noticed declines in production from Italy and the North Sea. I recall in the last quarter's conference call you had mentioned work overs taking place on your mature properties. I was wondering if you have a lesser inventory of work overs or you've done less work overs in the third quarter versus the second quarter and that might explain the declines?

We are continuing to carry out our own work over exercises where appropriate.

All right. Thank you very much.

You're welcome.

Okay. Thank you for that question. The next question we have comes through from the line of Barry MacCarthy of Exane. Please go ahead with your question.

Thank you. Good afternoon. I have a question on the [Sindial] provision. You've taken provision and there's a suggestion that some of that is for a decommissioning, does that mean a new plant closures and if so will that mean lower losses in future period? If it's possible to even quantify in rough terms.

And secondly, another special the impairment in E&P, can you give us some details on that please?

Well as regards E&P this was a question which came also in July. And I would say that the write downs which we have carried out are a part of an exercise which is a consequence of a confrontation which we are having in several parts of the world with some hosting countries. And we would prefer not to comment because there is the as you can understand Barry, an element of security in the negotiations which we are carrying out.

But it is the same nature which we commented in July. As a gas single it is not necessarily, even if our goal is exactly to want to continue in our approach to closure, it is if you want a building up of sufficient provisions in order to reach that final goal without having major impact.

Okay. Thank you. Can I just ask one more thing, I didn't quite hear about what you'd said about the subsequent share buybacks following the end of the nine-month period?

The fact that, you may remember Barry, that we are adopting a formula which has led us throughout this five years of life of our share buyback program. In October, because of the huge volumes which were traded, I guess because of the interim dividend and also because of the share price performance, the formula brought us to buy in October, much more than we had bought throughout the other part of the year. In fact, we bought more than €460m in the months of October only.

How many shares does that amount to, please?

The amount of shares I can come back to you with those.

Okay.

I can't remember, I know how much were spent. I don't remember how many shares we bought.

Okay. Thanks.

Okay. Thank you for that question. The next question we have comes through from the line of Paolo Merli from Intermonte in Italy. Please go ahead with your question.

Good afternoon everybody. First of all congratulations for the very good results, two quick questions. The first one is if you can quantify the impact on volumes arising from maintenance at Karachaganak field in Q3?

And secondly, was wondering if we can have let's say a fresh update on Gulf of Mexico operations and just if possible have a rough idea about how oil and gas production is going in the early stage of Q4, which I think should benefit very much from the Libyan gas project ramp up? Thank you.

Listen Paolo as regards the Gulf of Mexico operations we gave you an indication about the opening of the -- the new opening of the plant there and I think I can comment on this question again. As we said, in September in fact, on the 29th of September after the shutdown which occurred in the period from August 26 to September 4th and from September 20 to September 27, when our production was in the range of 45,000 boe per day. As we were saying on September 29, we were reviewing the production and we began with 11,000 barrels per day. Then in October we went up to 20,000 and 28,000 is what we expect for the beginning of December.

For the [total] pre-production it will take a little longer because a major impact will depend on the resumption of normal operation on the [mast] platform which was heavily affected by the hurricanes and where the production of our Europe field is delivered.

Now going to the guidance about the production in the fourth quarter or in the first days of the fourth quarter, I would say that the production will be higher in the fourth quarter than the level accounted for in the third quarter. That's what we expect. And it won't -- the overall 2005 production should be in the range of 1,720,000.

And about, I'm sorry, about Karachaganak?

Karachaganak, the impact in the quarter, due to the amount of activity that usually we run in Karachaganak field was 30,000 barrels per day, in the third quarter.

Thank you very much.

Okay. Thank you for that question. The next question we have comes through from the line of Michele Della Vigna of Goldmans Sachs. Please go ahead with your question.

Hello Michele Della Vigna here. I've got two questions. The first one is on Galp and the negotiations that you're having with the Portuguese Government. I believe you met this week and I'm just wanting to know what exactly your options are at this moment if they are more towards selling your 33% stake or actually increasing it to 50%?

Then the second question is on Venezuela where you are negotiating with the government about the taxes. And I read that the Venezuela Government is thinking about shutting down the offices of some of the companies that did not sort out the tax position. So I just wondered if you have actually reached an agreement with them or if you could be part of this group?

As regards the Galp, in fact in these very weeks we are meeting with the Portuguese authorities and we are exploring all the possibilities. We are not looking at just one solution, but we are evaluating a wider set of possibilities. We are not ready to sell any share of Galp and I would also say we are still of the opinion that Eni is a good partner for long-term value creation in Galp.

We are carrying out, as I was saying, discussions from this starting point. Galp is performing well, so we will see what the outcome will be.

As regards Venezuela, well the answer is we have reached an agreement, yes, it's no. We are still in talks it's not only us. There are a number of other international oil companies in the same situation and I to say that apart from negotiating positions, I mean no major conclusions have been reached so far.

Thank you very much Marco.

Okay. Thank you. The next question we have is a follow-up question from the line of Mr. Mark Hume. Please go ahead with your follow-up question.

Mark, we take away before, the question, if you check if there are additional questions or we can end the conference call?

Mr. Mark Hume isn't there. I do have two further questions in queue if you'd like to take them or would you like to end the call now?

How many?

Two.

Okay. We will take them.

The next question we have comes through from the line of Mr. Rory Stewart. Please go ahead with your question.

Had two questions please. Just in E&P I wondered how many exploration wells you participated in the third quarter and bearing in mind that you participated in 28 wells in the first half, if you had an expectation of how many you would participate in for the full year and the success that you've had in the Q3 in that as well.

And then on the downstream side, I just wondered if you could talk about some of the demand trends that you'd seen in the chemicals and in the refining side of the business with lower sales in Italy at the retail level, it looks like? Thanks.

Listen as regards the number of exploration wells I think that our IR people will be able to come back to you. And as regards the market situation in Italy for the downstream I would say that we have been experiencing a reduction in our sales in the range of 1%, which is if you want less, in fact it's half the rate which we have seen as regards the overall demand for gasoline in Italy. As a consequence of that, properly added market share will increase.

Okay. Thanks.

Okay. Thank you. So the final question on today's call comes through from the line of Jose [Agogliagi] of Banco Profito. Please go ahead with your question.

Good afternoon to everybody. I have just a few questions. Do you think that a merger between Citim and Snamprogetti it will be value creating? Do you think to review your budget price for oil given the strong performance?

And the last question, do you plan to cancel your treasury share or to use them for acquisition?

Listen as regards Citim and Snamprogetti this has been a subject which has been constantly raised and has been constantly reconfigured. For sure I wouldn't anticipate any exercise in that respect.

As regards the budget, the oil prices to be considered in our planning exercise, the answer is yes we are presently in the planning season and will be able to give you in three months from now, in February, beginning of March, our new scenario as regards the old prices.

As regards the shares I would like to remind you that for the use of our shares which according to the resolution which was adopted by the Annual General Meeting of, I think it was September 2000, any decision about the use of those shares will have to be submitted again to the shareholders. For the time being it is not in the capacity of the Board to use them as a matter -- as a currency, let me say, for M&A exercises. And evidently the decision to cancel the share would have to be brought to the attention of the shareholders as well.

Thank you very much indeed. Congratulations on your results.

Thank you. Bye bye, thanks everybody for joining us.

Ladies and gentlemen the conference call has now finished. Please hang up your phones.