埃尼石油 (E) 2007 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Eni 2007 first quarter results conference call, hosted by Marco Mangiagalli. My name is Wendy and I will be the coordinator for this conference. During the presentation you will be on listen only. However, at the end of the call there will be an opportunity to ask a question. [OPERATOR INSTRUCTIONS]. I will now hand you over to your host, Mr. Marco Mangiagalli. Thank you.

Thank you, Wendy. Good afternoon, ladies and gentlemen, and welcome to our first quarter results presentation. Let's start with the scenario. The market environment was mixed. Oil prices continued to decline from the record level reached in the third quarter of 2006 and averaged $58 per barrel in the first quarter, 6.5% lower than a year ago.

By contrast, our refining margin indicator averaged $3 per barrel and was 4% higher than in the first quarter of '06. It's worth saying that the margins realized by our own refineries showed a better trend than the benchmark, mainly as a result of lower maintenance activity.

Finally, the euro appreciated by 9% versus the U.S. dollar year on year.

As usual, I would like to remind you that Eni's results are affected by several issues, including the seasonal factors affecting the demand for natural gas and petroleum products used for residential heating, the demand for which is highest in the first quarter of the year, the coldest months, and lowest in the third quarter, the warmest months. Therefore, Eni's operating profit and change in net debt in the first quarter cannot be extrapolated for the full year.

Having said this, let us now comment on the financials. In the first quarter adjusted net profit amounted to EUR2.7b, down around 9% if compared to the same period of '06. This trend is a result of the lower operating profit, minus EUR300m -- 300,000 -- EUR300m, and the higher financial expenses related to the mark-to-market valuation of derivatives.

Despite an increased tax rate in the U.K. and Algeria, the adjusted tax rate amounted to 46.7%, substantially flat year on year, thanks to the strong results achieved in the gas and power division.

Adjusted operating profit decreased by 5% compared to the first quarter of '06, totaling EUR5.3b. This result reflects the weaker upstream trading environment that was partially compensated by the strong performance achieved in the other business lines, in particular gas and power. Net of the negative impact of mild weather conditions, the euro appreciation versus the U.S. dollar and the price scenario, the adjusted operating profit was up 4%.

Turning now to our business segments, hydrocarbon production in the first quarter of 2007 decreased by 5.1% compared to the same period of 2006, averaging 1.734m barrels per day. The main drivers of this trend are the impact of the termination of the Dacion contract and the disruptions in materials that accounted for 90,000 boe per day available.

I would like to recall that the Dacion field's production was accounted for in the entire first quarter '06 and that the unilateral termination of the contract by PdVSA was effective April 1, 2006. Excluding this negative impact, production was flat year on year. Of course, this production does not take into account the production from the newly acquired assets in Congo.

We expect production level for the full year 2007 to remain in line with that in 2006. The contribution from the assets acquired in Congo and the Gulf of Mexico and then the build of the Libyan gas project will be offset by the impact of Venezuela, the continuing disruption in Nigeria and the decline in production from mature fields.

The adjusted operating profit for the E&P division totaled EUR3.1b, decreasing by more than 26% on a like-for-like basis. This decrease reflects the impact of the appreciation of the euro versus the dollar, lower hydrocarbon production sold, lower realization prices in U.S. dollars partially offset by slightly higher gas prices, as well as higher operating costs, DD&A and exploration expenses.

As for the gas and power division, overall gas volume sold, both consolidated and associated, declined by around 10% in the first quarter of 2007, totaling around 27 bcm. In particular, gas sales in Italy, including self-consumption, decreased to 17 bcm as a result of the mild weather conditions. And this negative trend was partially offset by the higher volumes sold resulting from the increased number of customers served. International gas sales declined by around 7%, totaling 10.3 bcm, mainly as a result of the mild winter. This negative impact was partially offset by the higher volumes sold in the target markets.

Turning to the G&P division's financial results, reported operating profit for the first quarter increased by around 37% to EUR1.6b. The first quarter result includes negligible negative special items, as well as inventory losses of EUR40m. The adjusted operating profit amounted to EUR1.7b, up around 40% compared to the same period of 2006.

Let me elaborate now on the G&P EBITDA pro forma adjusted by business segment. Supply and marketing showed an increase by 73% compared to the first quarter of 2006. This strong performance was driven by the more favorable treatment received under the resolution 134 versus the 248, the effect of the recent resolution 79 that resolved the full recovery of the provision made in 2005 and the partial recovery of the provision made in the first half of 2006, according to the 248 resolution. Then, the favorable comparison versus the first quarter of 2006, which was negatively affected by higher supply costs related to the gas shortage of the 2005/2006 winter. Furthermore, the result benefited from the strengthening of the euro versus the dollar. These positive effects were partially offset by lower gas volumes sold in Italy and abroad, due to the mild winter.

Moving to the other business segments, the regulated EBITDA pro forma adjusted amounted to EUR412m, down 14% versus the first quarter of 2006. The decline is due to the lower volumes distributed in the first quarter as a result of the mild winter.

Powergen and international transportation showed a result in line with 2006. With reference to Powergen, starting from this quarter this business segment will include the tolling activity only, since marketing activity has been moved to the supply and marketing segment in accordance with our objective to develop [inaudible] strategy.

The R&M division reported an operating loss of EUR10m in the first quarter of 2007. This result includes negative special items for EUR18m related to provisions for environmental laws and redundancy incentives. In addition, we also accounted for an inventory loss of EUR112m.

On the adjusted basis, the operating profit increased by around 35% as a result of lower maintenance activity in the [Gela] refinery. The result also benefited from both higher margins in dollar terms and increased throughput, notwithstanding the termination of the Priolo contract at the end of 2006. These positive effects were partially offset by the appreciation of the euro versus the dollar and the lower contribution from marketing activities in Italy, mainly as a result of lower retail margin on gasoline and weaker gasoil consumption due to mild weather conditions.

As far as Eni's other businesses are concerned, in the first quarter of 2007 the petrochemicals division posted an adjusted operating profit of EUR122m. This increase versus the same period of 2006 was mainly due to the higher base chemical margins.

The adjusted operating profit of the oilfield services and engineering business totaled EUR175m [sic - see presentation], up 126% versus the same period of last year. This achievement was attributable to the higher results in onshore construction, as well as the higher contribution from offshore drilling and construction activities.

Other activities and corporate accounted for an overall operating loss of EUR85m, slightly below the loss accounted for in the first quarter of 2006.

During the first quarter of 2007 our business has generated operating cash flow totaling EUR5.6b that funded EUR2b of organic CapEx and a return of cash to shareholders of around EUR500m, including Snam Rete Gas. Over the same period the financial structure has strengthened and at the end of March the net financial debt decreased to EUR3.9m, bringing our debt-to-equity ratio to 0.09.

Let me underline that over the coming quarters we expect significant cashouts related to investments, dividends and to the ongoing buyback program. Assuming the $55 per barrel scenario, the net debt-to-equity ratio will be in the range of 0.3, 0.4 at year end, depending on whether Gazprom exercises the options on the 20% stake in Gazprom Neft and on the 51% of the former Yukos assets acquired.

CapEx in the first quarter of 2007 amounted to EUR2b, up 50% on a like-for-like basis. This was mainly due to higher expenditure in the upstream business, as a result of increased exploration expenses and higher development CapEx. Engineering and oilfield services also showed a significant CapEx increase related to the construction of a new FPSO unit.

For the full year 2007 we expect to invest around EUR10.5b on capital expenses. In addition, we will account for acquisitions of assets and interest amounting to EUR9.2b, mainly related to the recent transactions in Russia, Gulf of Mexico, Congo and Central and Eastern Europe. Assuming that Gazprom exercises its call options, Eni's overall investment in 2007 will decrease to EUR16.2b.

Before opening the Q&A session, I would like to provide you with a quick update on our recent acquisitions. All acquisitions are driven by a strong EBITDA and strategic rationale. In particular, in E&P the recent acquisitions represent a further step forward in our strategy of entering hydrocarbon-rich regions and strengthening our presence in core producing areas.

These transactions will boost our production growth in the 2006/2010 period and beyond, thus making Eni among the fastest-growing companies. The expected production growth in the plan period is now 4%. Through these transactions, Eni added approximately 2b of barrel of resources at an attractive cost, in countries where we can play an important role as operator and where we can add value by applying our core competencies.

In R&M the acquisition of the retail network in the Czech Republic, Slovakia and Hungary allows us to enhance the integration with our local refining capacity and to achieve a material presence in a fast-growing region.

We recently announced an acquisition in the Gulf of Mexico. This is an important move that will increase our presence in the area. 22m [sic - see presentation] boe of proved and probable reserves have been added and our equity production will increase from 36,000 to more than 110,000 boe per day in the second half of 2007.

Furthermore, operatorship in the Gulf is strengthened. Around 60% of the overall acquired leases are operated. In addition, we have gained access to leases with a significant exploration potential, where we can add value by applying our skills in offshore and deep offshore. Last but not least, this transaction is EPS and cash flow per share accretive from 2007.

And now a glance at Russia. This is a step change deal. We entered a hydrocarbon-rich country with huge resources and high potential for the oil industry. Entering the Russian upstream sector has been a strategic target for Eni for some time.

The Yukos asset acquisition is the result of a strategic alliance signed with Gazprom last November and represents a step forward in securing significant and valuable gas resources in a key region. The transaction is a tangible example of the competitive advantage of our integrated business model that allows us to capitalize on our strong position along the entire gas chain. We have gained access to large and long-lease assets that will boost our production growth in the long term. By applying our operational skills and technology, we will maximize the value of those fields.

Three further transactions in Congo, Alaska and Angola represent a further important step in improving the value and quality of our upstream portfolio. First of all, Congo. The deal allows us to add 126m barrel of 2P reserves to our current portfolio. Thanks to this acquisition, our Congolese production will increase from 67,000 boe per day in 2006 to approximately 100,000 boe in 2010. The transaction is expected to be completed shortly. This will enable us to start booking reserves and accounting for production.

Second, Alaska, where we have acquired a 70% stake and operatorship of the Nikaitchuq field. The reserves in place amount to around 70m boe and first oil is expected to flow by the end of 2009.

Finally, last April we signed a memorandum of understanding with Sonangol in Angola for the acquisition of a 13.6% interest in the Angola LNG project. A new plant with a 5m-ton capacity will be constructed. The LNG will be directed to the United States, where Eni will acquire re-gasification capacity of 5b cubic meters per year in Pascagoula. This project, which will develop over 200b cubic meters of gas in a period of 28 years, allows us to monetize currently untapped reserves.

In the refining and marketing business we announced the acquisition of 102 retail stations in Czechia, Slovakia and Hungary, the aviation business at Prague and Bratislava Airport and the lubricant business. The closing is expected in the third quarter of 2007 and the transaction is subject to the approval of the antitrust authority.

The deal will improve the integration of our local refining capacity and strengthen existing marketing business in a fast-growing region, reaching a market share of around 10%. Furthermore, we will enhance significantly the quality of our network. The outlets acquired have a throughput per site of 4.9m liters per year, are 95% company owned and all offer non-oil products. Finally, with this transaction we strengthen our product portfolio, more than doubling the lubricant sales in the area and acquiring the avio business. As far as the financial impact, the deal allows us to exploit synergies and provides a double-digit return. Last but not least, it is EPS accretive from 2007.

Thank you for your attention. Now we are beginning the Q&A session. And I would like to let you know that, considering the importance of the recent acquisitions we made in the upstream, Stefano is here with us trying to address the questions you might have. Thank you.

Thank you. [OPERATOR INSTRUCTIONS]. The first question comes from the line of Neil McMahon from Sanford Bernstein. Please go ahead with your question.

Hi, good afternoon. I've got two questions. The first is really regarding your production growth of 4% in your guidance. I really wanted to get an idea of what -- if that assumes that Gazprom exercises their call option to buy back some of that new production you've purchased.

And also, does this mean that your underlying growth rate of 3% from your strategy presentation is somewhat lower, if you've bought all this production and you're only increasing your growth rate by 1% going forward?

And the second question was really to get a bit of clarity on the amount of the provision you wrote back in the gas and power sector. Thanks.

Neil, this is Stefano answering the first question. As far as production growth, we are referring to the 4% over the period 2007 to 2010, which automatically implies that there is no expected production coming from the acquired assets in Russia.

As far as the 4%, 4% obviously the result of the 3% which we had announced with our four-year plan presentation, taking -- and adding on top the new assets which we have acquired. But to make a full judgment, you have to bear in mind that during the course of 2007, of course, we shall start accounting from -- for production coming from the new assets according to the completion of those deals.

So, basically, effective date of the Dominion acquisition July 1, 2007, we would expect something between 35,000 and 40,000 barrels per day to be on -- to be accountable on the full-year basis. While, as far as the Congo lease assets acquisition, that deal is due to be completed shortly, probably during the course of the next few weeks. And you know that, as far as the contribution for 2007, we said that the contribution will only be around 15,000 barrels per day.

Obviously, in the assessment we made we have taken -- we have also taken into account what is happening while we're speaking in Nigeria. And I'll tell you that the 4% accounts for an impact coming from the present unrest in the country of the same level as we have been experiencing during the course of the first quarter of 2007, which is about 27,000 barrels of oil equivalent per day. Should that worsen during the course of the last -- the results of which will attract a further judgment. We expect of course that over a reasonable period of time the situation will ease and will improve and we shall be in a position to get to a more normal level of production for us in the country.

Just maybe a follow up on Russia. Could you give us some guidance over the timing of when Gazprom may exercise their option, but also in terms of when we should look to model in the production and reserves into your asset base? So, maybe a bit of clarity on that would be great.

Yes. Let me say that contractually Gazprom, they have two years to exercise the option. Then I will leave to you the judgment there. We may expect the option to be exercised toward the end of this year but that is not firm at all.

In terms of modeling production, we expect that -- obviously, as a start we shall not wait for Gazprom to exercise the option. We are starting right now, as we're speaking, in working out our development modeling, as well as getting control of the assets, as well as making our internal assessments of the assets.

In terms of production, I would say the logic, and this is where I can tell you what we have assumed in our evaluation of the opportunity. 2011, the original date for the start up of production with one field in 2011, the other two fields in 2013 and a sort of logical date for a plateau around 2015.

Great, thanks for that clarity. And maybe just the other question on the provisions, amount [multiple speakers].

Yes. Neil, this is Marco speaking. The order of magnitude is in the range of EUR140m, which is, if you remember, the remaining roughly 50% of the provision which we had released in 2006 when we had evidence of the improvement of the regulatory framework as a consequence of the coming into force of the 134 replacing the 248.

Great, thank you very much.

Thank you. The next question comes from the line of Jason Kenney from ING. Please go ahead with your question.

Good afternoon, guys. It's Jason from ING. Two questions on Yukos, if I may. Am I correct in thinking that the net acquisition cost for you will eventually be only $500m when you net out your share of the purchase price and then add back what Gazprom will pay you for Gazprom Neft, and also the 51% stake in the assets?

And then, secondly, have you thought what international assets you may divest to Gazprom once you begin CapEx spend in Russia? So, I think that was part of the JV agreement announced last November.

Yes, correct. Let me say that if you -- when you strip out the Gazprom Neft option and then the Gazprom exercise the option for the ex -- former Yukos assets, our investment would be reduced to $630m. So actually a bit more than the $500m you -- dollars, I'm talking of dollars.

Okay.

As far as the international assets, you are right. This swap mechanism has been established. We are currently studying the opportunity with Gazprom and we'll make the information known once the agreement is finalized.

Okay. Maybe one quick follow up, if I may. You mentioned the first production in 2011/2013. What kind of CapEx commitment is required before 2011 to get the first assets on?

With all due respect, it's a bit too early to say exactly we are doing at the moment. We would consider logical in terms of CapEx development cost per barrel something in the range of $3 per barrel, so you might be working out yourself an assessment.

Okay. There is a question on the back of that, then, because you've given us an indication of the, I think, commercial reserves associated but the development reserves, what would be included there?

No. We have only consistently been talking of resources. The amount of information which was available is not sufficient to make a judgment on a logic profile of reserve booking at this stage.

All right. I had to try anyway, but thanks.

You gave it a try, well done.

Thank you. The next question comes from the line of Iain Reid from UBS. Please go ahead with your question.

Afternoon, gentlemen. A couple of questions, please. I understand you won't give the specific CapEx for the Russian development, but maybe you could give us some guidance as to where you think overall Group CapEx is going to go now over the next few years, because presumably it's going to be some way above the level you gave at the strategy meeting some time ago?

And secondly, on the Dominion deal, I wonder whether you can talk about the oil and gas price assumptions you used there, and how much -- and how far forward you've hedged the production in order to lock in the economics of the deal?

Listen, Iain, as regards the CapEx, this goes together with the answer which Stefano gave before. We [emphatically] stick to the guidance which we have given on the occasion of the strategic presentation. So we stick to the overall Group CapEx in the range of the EUR44b or EUR44.5b for the time being.

As regards the hedging, this was applied to the acquisition of, let me say, of the two producing assets. And this range of prices is between the $55, in the range of the $60, let me say, per barrel in the years from 2008 to 2011.

And your long-term assumption?

It was the long-term assumption when we made the deal. And as we have been, let me say, consistent with what we normally say, that on extraordinary situations we might decide to hedge but on a period of time, of years. But then the long-term assumptions remain the ones which we have announced, which was, if you remember, $40 per barrel [inaudible].

[The prices from] 2007?

Yes, up to the four years plan, yes.

Okay, gentlemen. Thanks a lot.

Thank you. The next question comes from the line of Alastair Syme from Merrill Lynch. Please go ahead with your question.

Yes. Good afternoon, Marco and Stefano. Can I just ask, on the gas business you mentioned the reversal of half that 248 provision. Do you envisage at this point that you might be able to go beyond that for the remainder of this year?

And also, on gas, can you update us as to the status of Mr. Bersani and his study on gas and electricity and how that might relate to the timetable on Rete Gas?

Well, the second part of the question, to be quite frank, I understand even if almost every day you read something in the Italian press, there is no evidence of a step forward in that respect.

As regards the provisions, I don't want to anticipate anything. There might be, but really the order of magnitude would not be meaningful because of the possible outcome of the renegotiation with the wholesalers, which is foreseen in the overall framework of the 134, but that would be not of substance as it was what we have done so far.

So, it would require wholesalers to want to agree to raise prices? Is that what --?

Yes. Now, there is a change in which we are renegotiating and the authority will have a judgment. So really it is a complicated exercise which doesn't allow us to make any best guess.

Okay. And then so, where do we stand on Rete Gas? Is it formally part of the Bersani [multiple speakers]?

Rete Gas is exactly where we were when we last talked about that, 24 months after the issuance of the Prime Minister Decree, and that's all.

Okay, brilliant. Thank you very much, Marco.

Thank you. The next question comes from the line of Irene Himona from Exane. Please go ahead with your question.

Good afternoon. I had one question on production. I was wondering if there was any material positive PSA effect in the numbers this quarter.

And, secondly, power generation, I think Marco mentioned that you are now going to split that between marketing and tolling. On a pro forma basis, is it possible to tell us what Q1 would look like in power generation if that change had taken place? Thank you.

Impact is about 8,000 barrels, the impact of the PSA effect on the positive side vis-a-vis a reduction of the scenario from 61.8 to 57.8.

As regards the power generation component, Irene, let me find it and I'll come back to you.

Okay, thank you.

Thank you. The next question is from Lucy Haskins of Lehman Brothers. Please go ahead with your question.

Good afternoon, gentlemen. A couple of questions, if I may. The first is, clearly a strong performance from the gas business. Do you think you'll be likely to raise your guidance in terms of your estimate for free cash from that business?

And the second question was what kind of tax rate steer you might give us for the full year.

Yes. As regards the guidance for the full year, we'll stick to that. I would say that presently we expect at least to be where we were last year, considering at the end of last year those 3.8b and considering evidently the mild weather which we have experienced in the last winter months, and also assuming that the next winter months will be, let me say, normal and not as mild as they were January and February.

As regards the tax rate, I think that the guidance of about 50% of the assumption of a $55 per barrel oil price is the one which we are presently envisaging.

Thank you.

And then, to Irene, I think the Powergen contribution to the result at operating profit level was EUR57m.

Thank you. The next question comes from the line of Theepan Jothilingam from Morgan Stanley. Please go ahead with your question.

Yes. Hi, good afternoon, gentlemen. Two questions, actually. Just, firstly, in terms of your downstream and R&M, you had heavy maintenance in Q1. Could you please give us a little bit of visibility, perhaps, to how your utilization rates have been for the second quarter?

Secondly, just on CapEx, I think your guidance for the full year seems to be a bit lower than the run rate you indicated with the strategy presentation. I was -- particularly given that you've had perhaps increased CapEx from the acquisitions you've made. I was just wondering has there been any sort of project slippage in the portfolio into 2008. Thank you.

No. I think that, at least after this point, after the three months of '07, the guidance for the CapEx for the 2007 is EUR10.4b, EUR10.5b, which we had in mind when drafting the budget and the four-year plan. So, at this point, we do not envisage any change with respect to what we had in the -- what we have mentioned in February and March.

As regards the, how can we say, an overlook about the shutdowns which we had in our refineries, I would say that to the plants in Gela and in Taranto were the ones which experienced shutdowns in the first quarter. In Gela it was the [cooking] and coking and pumping units and in Taranto it was the replacement of the residual hydro conversion unit catalyst, and also the impact of a shutdown due to a power station failure in March. While, in Germany, the performance of our participating refineries in Schwedt was negatively affected by the interruption of the Ural crude supplied by the Druzhba pipeline during the crisis between Russia and Ukraine, and by an upset at the [Klaus] plant in last February. These were the main events upsetting the operation of the R&M business.

And have those units come back on stream for Q2?

Well, they are supposed to come back on stream. The problems have been solved already, so they are now coming back to their ordinary operations.

Okay. Thank you very much.

You're welcome.

Thank you. The next question comes from the line of Barry MacCarthy from ABN Amro. Please go ahead with your question.

Thank you. I have two questions, please, gentlemen, one on the gas and power division. If you could at all quantify the currency impact on the result of the gas and power division in the first quarter.

And the second question on Karachaganak Phase III. I've seen some news recently, agreements between Russia and Kazakhstan and so on. Is the way now clear to develop that project and is it still a project that's in your 2010/2013 window for production to commence?

Listen, I'll give you a guidance about the impact, Barry. It's in the range of EUR150m in the first quarter.

Thank you.

As far as Karachaganak concerns, it's too early, I have to say, to make a judgment from the announcement which we all heard yesterday. Of course, we consider important that the conversation here is ongoing and we really look forward to see that there is an agreement in place between KazRosGas, the seller of the gas, the joint venture between Gazprom and KMG, and Gazprom. So things -- it's a sign that things are moving.

As far as Karachaganak, I'm sure you know that we are going ahead with the building of the fourth train, as well as we expect to have a sanctioning of the full Phase III development in 2008, to have the Phase III on stream on 2012. Basically, that is the situation.

Okay. Thank you very much.

Thank you. The next question comes from Michele Della Vigna from Goldman Sachs. Please go ahead with your question.

Hi. Yes, I would like to ask two questions, actually. The first one is regarding the Damietta and the Brass LNG projects, just to understand how close you are to sanctioning those two projects.

And, secondly, given the asset acquisitions you've done recently, I was just wondering which other areas of your portfolio you might want to expand specifically? What is the state of your ambitions in Canada at this point? Thanks.

Yes. Damietta is going ahead. The feed design is progressing. We expect a final investment decision at the end of this year. As far as Brass, all the activities for the time being are outside the country so, again, we are progressing. Obviously, Brass needs to be read in conjunction with the present situation in the country.

As far as which other assets, I think Marco made quite clear how strategic we consider the feat with the five operations we recently made. If you have to -- just to address your question related to the [Tarzen], I think the answer is that, as far the technology is concerned, that we are going ahead with our development on the technology. We have still an interest in the unconventional, such as the Tarzen but, of course, each opportunity needs to be judged in its own right. For the time being, we are quite happy with what we have done and will concentrate on the maximization of the outcome from the operations we have just concluded.

Thank you. The next question comes from the line of Paolo Citi from Intermonte. Please go ahead with your question.

Hello. Good afternoon, everybody. I have three questions, if I may. First of all, regarding the gas and power division, you mentioned Q1 results in '06 were penalized by higher costs due to the climactic conditions. I'd like to have an idea from you regarding the amount of this additional cost related to the recourse of strategical reserves.

The second question relates to the engineering division. I would like to understand the exact sequential trends in figures, because I was looking at Saipem results and I saw a declining result quarter on quarter, while you reported increasing results. So I would like to understand exactly the issue underlying this different trend.

And my last question relates on the Venezuela, if it's possible to have an update regarding the situation on Dacion international arbitration and the potential agreement with PdVSA for the Corocoro field. Thanks.

Okay. I'll start addressing the third question about Venezuela. Venezuela, basically you know what is the situation as far as Dacion concerns. We have presented our recourse to the arbitration court of the World Bank. That is an ongoing process and so the situation is developing in that direction for the time being.

As far as Corocoro concerns, you know that May 1 the operatorship has been handed over to PdVSA. And you know that we have a certain amount of time in order to agree what are the conditions for the, I would say, about 10% of our share which we should transfer to PdVSA. So the situation is in evolution. I would say that Corocoro, as far as Corocoro concerns, we are progressing as anticipated in terms of the transfer of operatorship.

As regards the reported different figures in the -- as regards the consolidated figures relevant to the engineering and construction, I have to ask you to go back to the investor relations in order to have a better understanding of what you mean.

While, as regards the impact on the gas and power division of the climactic crisis of last winter, of '06, the impact was in the range of EUR150m.

Thank you.

Thank you. The next question is a follow-up question from the line of Neil McMahon from Sanford Bernstein. Please go ahead.

Hi. Neil McMahon again. Just a quick question, Stefano, just to go over the exploration opportunity in the Gulf of Mexico that you've got with the Dominion assets. To me, when you looked at the placing of where the current production and development opportunities are, it doesn't seem to lie all that close to the lower tertiary trend. And it would seem strange to gather information outside the main area of large-scale exploration that a company of your size would be -- seem to be undertaking in the Gulf of Mexico. So, maybe just some rationale why you've gone into the assets you've gone into and your outlook in terms of the exploration assets you also picked up would be fantastic.

I think we have been quite transparent in telling you what is the value we have attached to the exploration portfolio of Dominion. Actually, we believe that the leases we have acquired fit well with our existing portfolio. Some of these -- these leases are located in the Green Canyon and the Mississippi Canyon area with some good myosin potential.

Others are in the new promising areas Walker Ridge and Keathley Canyon, which fit very well with [Weaver], with the current lower tertiary portfolio of Eni in the area. I would say it's also important to bear in mind that more than 50% of the acquired blocks are operated and they have quite a delayed expiry date. So I believe that, all in all, the exploration potential upside, I would call it, is quite high.

And when should you be drilling your first wells there? I'm presuming it's not going to be for at least a year.

I'll tell you the truth; I'm flying to the States on Monday, so if you ask me on Tuesday I'll tell you, because I'm going to be spending a few days with our new colleagues there.

Great, thanks.

Thank you. The next question comes from the line of Edward Westlake from Credit Suisse. Please go ahead with your question.

Yes. Good afternoon, everyone. I guess a lot of questions so far, but just on the Congo. At what point, or what time, do you think you can come back to the market, having looked at those assets, to talk about the recovery factor that you think you can get from the M'Boundi field using your technology? And, perhaps, if you have a feeling already for what that recovery factor might be.

No. I think we would like to come back when we have certainly something more than a better feel. We are already, obviously, starting the situation. We are re-engineering the water injection scheme, to which we attach a lot of potential. I think a reasonable date is with the announcement of the 2007 results and the strategic presentation in February/March next year.

Thanks very much.

If there is no more questions --

Thank you. That was the final question for today. I will now hand you back to your hosts to wrap up this conference call. Thank you.

Thanks, gentlemen, for attending. I think we have addressed your questions. If we missed something, Claudia and her team are, of course, available for answers to further questions you might have. Many thanks and have a nice weekend, everybody.

Bye-bye, everybody.