埃尼石油 (E) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Eni's 2012 first quarter results conference call hosted by Alessandro Bernini, Chief Financial Officer. For the duration of the call, you will be in listen-only mode. However, at the end of the call, you have the opportunity to ask questions.

I'm now handing you over to your host to begin today's conference call, thank you.

Good afternoon, ladies and gentlemen, and welcome to our first quarter results conference call. Before I take you through the financial results, let me give you a summary of the main highlights of the quarter.

In E&P, we are continuing to strengthen our long-term growth prospects. Our exploration continues to deliver exceptional results.

In the first three months of the year, we added around 1 billion boe of new exploration resources through Mamba North 1 in Mozambique, Havis in the Barents Sea, which together with Skrugard, has recoverable resources of 500 million barrels; and other discoveries in proven or near field areas.

Meanwhile, you will have seen that we have signed a strategic agreement with Rosneft to gain access to very promising exploration licenses in the Barents Sea and in the Black Sea, increasing the potential of our portfolio and providing support to long-term growth prospects.

In Gas & Power, in March, we completed the renegotiation of our gas supply contracts with Gazprom. The recognition of the associated economic effects was retroactive to the beginning of 2011, and is included in our Q1 Marketing results.

Finally, we are progressing on our strategic objective of our lock-in value from our non-core listed assets.

Regarding Galp, on March 29, we signed an agreement to sell 5% of the Company to Amorim for EUR14.25 per share. Once the sale is completed, we will have significant optionality on the disposal of our stake.

With regard to Snam, I would like to remind you that the Italian Government has passed legislation envisaging the completion of our exit by September 2013. The method by which the separation will occur will be defined by a government decree to be issued at the latest by the end of May.

Turning now to our results. In the first quarter of 2012, the market environment was broadly positive. It was mainly driven by the Brent price, which averaged $118 per barrel, up 13% compared to the first quarter of 2011.

The euro/dollar exchange rate was also supportive at $1.31 per EUR1, with an appreciation of the dollar of 4.1%. However, the European refining margin Brent/Ural was $3.3 a barrel, in line with the first quarter of last year.

In the first quarter of 2012, adjusted operating profit was EUR6.45 billion, up 26.5% from the first quarter of 2011. This was due to the better operating performance, supported by the Exploration & Production division up 24%, and to the increased results of the Gas & Power division, up 57%, driven by stronger profits from the Marketing segment. This was partially offset by weaker results in R&M and Chemicals.

In the first quarter of 2012, adjusted net profit was EUR2.48 billion, up 13% compared with a year ago, as a result of better operating performance. This positive aspect was partially offset by higher financial charges which increased by EUR207 million, and a higher consolidated tax rate, up approximately 6 percentage points. The fiscal impact was the result of a higher tax rate in E&P and to the division of the so-called Robin Tax enacted in August 2011.

Looking in more detail at the Exploration & Production, in the first quarter of 2012, Eni reported liquids and gas production of 1.674 million barrels of oil equivalent per day, representing a small decrease from the first quarter of 2011, down by 10,000 boe per day, or 0.6%, excluding price effects, which reduced the Q1 production by 14,000 barrels of oil equivalent per day.

Compared to the year earlier quarter, the production for the first quarter was marginally higher, up by 0.2%, driven by the ongoing recovery in Libyan production and the startup and ramp up of new fields in Australia, Egypt and the United States. These positives offset negatives from the sale of minor assets and some minor unplanned production losses.

The Exploration Production division reported an adjusted operating profit, of EUR5.1 billion, increasing by EUR980 million, or 24%, on the back of stronger oil and gas prices, and the recovery in Libyan activities.

In Gas & Power, overall volumes sold, including consolidated and associated companies, fell by 5.4% to 29.9 bcm. The decline is mainly due to weak demand and higher competitive pressure in Europe.

In Italy, overall sales rose by 1.4%, with higher demand from residential users, and higher sales to the network balancing market, more than compensating declining volumes sold to power generation and wholesalers.

The Gas & Power division reported an adjusted operating profit of EUR1.5 billion, increasing by EUR546 million, or 57%, from the first quarter of 2011. It is worth reminding you that the first quarter Marketing results reflect the benefits of the finalized renegotiation with Gazprom retroactive for the whole of 2011.

Gas & Power adjusted pro forma EBITDA for the first quarter of 2012 was EUR1.641 billion, up by EUR587 million, or 56%, compared to the same quarter of 2011. The increase is attributable to the Marketing business, which more than doubled the result of the year earlier quarter.

Excluding the portion of benefits from the Gazprom renegotiation associated with previous quarters, the Marketing segment reported stronger results driven by improved supply costs associated with the revision of long-term gas supply contracts and the recovery of Libyan imports, and stronger seasonal sales, owing to the particularly cold winter. This positive was partially offset by a slowdown in demand across Italy and Europe, and the rising competitive pressures.

Regulated businesses in Italy recorded a 4.3% increase in results, while the International Transport activities reported a lower operating performance, reflecting the asset divestment which occurred at the end of 2011.

In the first quarter of 2012, the Refining & Marketing business reported an adjusted operating loss of EUR228 million. The deterioration, compared to the first quarter of 2011 reflected the weak industry fundamentals across Europe.

In addition, Refining results continued to be adversely impacted by rising costs of energy utilities indexed to oil prices and shrinking price differentials between light and heavy crudes.

Our initiatives to counteract this very weak trading environment included an efficiency enhancement, the optimization of supply activities and lower throughputs at the weakest refineries, including temporary shutdown. As a result, the utilization index of our refineries fell to 63% compared to 82% in the first quarter of 2011.

Marketing results were negatively affected by a decline in retail and wholesale demand for gasoline and gasoil, dampened by a cyclical downturn and competitive pressures, while selling margins in retail and wholesale markets were squeezed by a rapidly rising commodity cost that were only partially transferred to prices at the pump and clients.

In the first quarter of 2011, the Chemicals division reported substantial operating losses of minus EUR162 million. The negative performance was driven by higher costs for oil feedstock which impacted the unit margins, as product demand suffered in a recessionary environment. This was particularly true for basic chemical commodities with the benchmark record margin falling in negative territory.

Engineering & Construction business reported a strong operating performance which was up by EUR32 million, or 9.4%, to EUR374 million from Q1 2011.

Other Activities and Corporate showed an aggregate loss of EUR127 million, in line with the EUR129 million in the first quarter of 2011.

Net cash generated by operating activities amounted to EUR4.2 billion. Capital expenditure for the quarter has been EUR2.9 billion, mainly related to continued development of oil and gas reserves, the upgrading of recent offshore vessels belonging to Saipem, and the upgrading of gas infrastructures.

The Group also incurred expenditures of EUR500 million related to the financing of the Nuon Belgium acquisition, and joint venture projects.

Net financial debts at March 31, 2012, was down by EUR600 million from December 31, 2011, improving our leverage from 0.46 to 0.43.

Thank you for your attention, and now with my colleagues, I'll be pleased to answer to your questions.

Ladies and gentlemen, the question and answer session is now open. (Operator Instructions). Theepan Jothilingam, Nomura International.

Three questions, please. Firstly, just on Snam. I know we're waiting for a government decree, but I was wondering whether you had any increased visibility on when you -- whether you think a disposal would be for cash, or whether you think a spin-out is a more likely outcome.

Secondly on Galp, the second process I guess, or second part of the process on a divestment is to sell the 18%. Again, do you have any view on timing, whether you believe those shares will be drip-fed into the market, or is there a strategic investor that you'll be discussing a disposal with?

And then the third question just on exploration; a very exciting agreement you've made with Rosneft. I was just wondering, do you have any color on the timeline of workflow there, when you expect to drill a first well? And then secondly, just is there any commitment of capital as part of that deal?

Thank you.

So as far as the agreement recently signed with Rosneft, I'll leave the -- I'll pass the table to my friend, Claudio Descalzi, who is with me now. But just starting to answer to your question as far as Snam and Galp.

Snam, as you have already anticipated, it's still too early to make any assumption about how the separation will take place. And for sure it is, I believe, not correct to speculate about what could be the potential transaction we could be realizing.

But however, you know quite well that our suggestion, our strategy, which of course we are suggesting, supporting to the Government, is a strategy whereby the famous three pillars of our strategy must be satisfied, which means that the transaction to be realized, must be satisfactory, must be good for our shareholders and the shareholders of Snam as well.

But in particular, at the end of the transaction, Eni must be stronger than before, which means that Eni can be stronger only to the extent a cash transaction will take place.

So for sure we are supporting a strategy whereby a cash consideration will be recognized to Eni. We are discussing with the Government, and I can say that so far, we are a little bit positive in this respect.

As far as Galp, as you correctly stated, after having sold the first 5% to Amorim at an agreed-upon price of EUR14.25 per share, then we will be free to sell in the market the 18% or 20%, depending on the possibility to place also a convertible bond.

As far as the type of transaction which can be applied in order to dispose the 18%, we can either refer to a market type of transaction, accelerated building, private placement, an [OPV], or we can have access also to a strategic buyer. In this latest situation, we have still to agree the identity of the potential buyer with Amorim, but based on the approach, the unsolicited offer which we have received so far, either from financial institutions and the strategic investor, I do not expect to face any major problem in finding an agreement with our former partner, Amorim.

So I am pretty confident that already in 2012, we will be in a position to dispose a significant stake -- a significant portion of our stake in Galp.

Thank you.

For Russia, the agreement we signed with Rosneft is a strategic agreement that includes the Russian activities, and will be followed by activity and alliance also abroad, outside Russia.

Talking about Russia, the scope of this agreement, as you know, is the exploration development of three licenses in the Barents Sea and one in the Black Sea. We have a commitment to acquire seismic data to the [N3D] in the Barents Sea, and Rosneft already acquired 2D and 3D seismic in the Black Sea.

So in terms of commitment, talking about [sea gas], we have a strict commitment of three to four wells for an expenditure around $800 million, and additional two contingent appraisal wells in the Barents Sea for an additional $200 million. So that is the main commitment.

In terms of programs, now we finalize the agreement, we have to pass through the [Shiroba] agreement and the GOA, and I think that will be done in the next four or five months. And then we start immediately our activity. Then we start in parallel in the Barents Sea and the Black Sea. I think that the first wells will be drilled by the by the end of the full year plan, so 2014/2015.

Could I just follow up, coming back to your statement, Alessandro, one on Galp? Should one see the EUR14.25 as a floor price for you to sell on any further stake?

Well, of course, the environment compared to the timing when we have agreed the EUR14.25 per share with Amorim, the environment has been a little bit changed, so I don't want to fix any floor or cap for -- to target, as a target for our future sales. But what I can say is that for sure, the present, the prevailing market prices do not meet our minimal expectations. So for sure, it must be significantly higher compared to what is today the stock price of Galp.

Very clear. Thank you very much.

Iain Reid, Jefferies.

Can I ask you two questions? Firstly, is it possible you can tell us in the Gas & Power division and your Marketing segments the amount of the 2011 contribution which was made? Obviously, we want to forecast the numbers going forward and for the full year, so we really need to know what that element was, because obviously it's not repeatable.

And secondly for Claudio, is it possible you can update us on what's happening on unitization on the Mozambique blocks and what the program is for 2012 and maybe '13 in terms of the exploration targets, the appraisal targets which you've got in mind following the completion of the current -- I think it's called the Coral well you're drilling at the moment?

Thanks.

Okay. On your first question on Gas & Power, unfortunately, we have to repeat that we can't make comment on this because it's a sensitive element of our negotiation.

Okay.

Mozambique. On unitization, we set up a program with Anadarko, and -- for the unitization between the two joint ventures. So we started not only the discussion, but we have a program. I cannot tell you exactly now when we will finish this issue of the unitization. I just can say that it's not a very complicated issue. We are in agreement. We already work together in other unitizations, so I think that that will be a question that will solve by the end of the year.

You know that a unitization pass through different gates, but the finance is [very beginning] and (inaudible) participation, that is an initial one, then we start working. So that's started; that is something that we started positively with Anadarko.

Then for the work program, as you said correctly, we are drilling Coral, and I think that we will get results from this well, from this appraisal well at the end of May, by the end of May. And then we continue back to back until the end of the year. I think that we will be in the position to finalize our exploration activity by February/March 2013.

So that is the program, and meanwhile, we are working also on the development program on LNG, on infrastructure, so we are in parallel working also on the next steps.

Claudio, if I could just come back on the other development program. Are you working together with Anadarko even for development of prospects which lie entirely on Area 4? I.e., is it going to be like one facility rather than two or three?

You know that in terms of [POD], you [work firstly in the ways] of the wells, and I think that it is a priority. As we said, it's a unitization and plan of development of the unitized area. So that means that we absolutely work together with Anadarko in terms of development wells, facilities, treatment, all this kind of stuff. So we work with them.

Now we've got a new big discovery in (inaudible) the area, in the Area 4 more than [ATGS], and we are working on that. But it's a really in an early stage, and we'll see if we will have the capacity for this development, or otherwise we go ahead with an additional development. But our priority is work with Anadarko on the unitized area.

Okay, thanks for your help.

Clint Oswald, Sanford Bernstein.

A couple of questions. Just thinking about the Russian gas field that you started up recently, selling the gas to Gazprom, can I just confirm that that is the regulated Russian gas price that you will be receiving, or if there's any discount to that? And I note that you retained the buyback and marketing rights. Do you expect to use those rights at any stage, or is that just a separate clause?

Secondly, just wondering about your US volumes. Oil and gas seems to be a large stepped decrease in the US gas production. Is that just a function of the gas price, and should we expect to see those volumes decrease further?

And then just finally, quickly just back on the Barents Sea, maybe a question for Claudio, I'm just wondering have you looked at these estimates of 36 billion barrels of oil equivalent? Are you comfortable with that resource number?

Thank you.

First, if we talk about the [Imal] area and there was a question on the gas price. As you say, the gas price come from a former -- for our Imal field, so is linked to the domestic and is linked also to the expert. And so as you know, the domestic that is regulated, that is updated every year. So that is as for the other gas producers in Russia.

For the US, it's true we reduced our gas production, but it's not due to price. We reduced the gas production in some producing fields for maintenance program, and also from some technical reasons. So our aim is to increase or restore this production in the next months and recover the US production average rate forecast for 2012.

About the resources for Rosneft, that is a preliminary figure coming from data, normally 2D data in the Barents Sea, and 2D and 3D data, new data in the block -- in the Black Sea. So that is we work with Rosneft; that is mainly Rosneft evaluation. Now we are going to a new process of data acquisition.

In terms of structures, volume, the number of structures, I think these figures are quite accurate from a volume point of view. Then we have to see from a physical point of view, thickness, net to gross, and transmissibility of the system, because we are talking about [science] in these figures; how we can translate these figures in reserves.

That's great. Thank you very much.

Mark Bloomfield, Deutsche Bank.

Two questions, please, firstly coming back to gas marketing. Just wondered if you can help us to get a better sense of the sustainable profit improvement, specifically if we set aside the debate around the retro-active element. To what extent do you think that you can enjoy a kind of ongoing benefits from the reduced cost of gas and actually retain those benefits as opposed to simply passing them on to your customers when we come to the start of the next gas year?

And the second question, I just wondered if you could remind us of your exploration and appraisal activity plan for the Norwegian part of the Barents Sea, and also for Indonesia for the remainder of 2012. And thinking there about the number of wells, timing, targets, etc.

Thank you.

On your question about gas, we can today confirm our guidance for 2012 that we gave at Q4 results, and this means higher EBIT and higher EBITDA, which are the elements supporting this that make our estimate sustainable as planned.

First, we have the (inaudible) renegotiation. It is positively impacting retroactively, but of course also in the volume that we are selling we will continue to sell.

We have the benefit of the production of Libya. That is back to normal and that is something that should continue. We have partially captured this year the negative impact of the sale of the international pipeline.

On top of that, of course, we have to consider that besides these special effects, there is our underlying marketing situation. Our business will be more impacted in the remaining part of the year by the continuing increase in oil price and reduced demand in Italy and Europe as well.

So the mechanism that we will use to protect our result is again realigning our cost of supply to the market through the renegotiation. We have a number of them in front of us, of which two important ones this year. So these are the key of maintaining sustainable our results at the time of continuing marketing weakness.

Okay, exploration?

So as you know, Norway and Indonesia are two of our best hub in terms of exploration potential.

We forecast to drill two wells in Norway on new prospects. We have additionally 11 prospects in Norway that we plan to drill in the next three years. So this year, we will explore two new prospects that are not very far from Skrugard. They are south of Skrugard.

And for Indonesia, we start also this year. We have to appraise -- we have an appraisal campaign in the Jangkrik North East, and we also in this case, we drill in the next couple of years additional five or six wells; seven wells, sorry.

So in these two hubs, I think that in the next three years we'll through these two hubs will increase our resource base. And meanwhile, we are also developing different fields in the area where we can get the FID in the next couple of years; so not just exploration hubs but also very important production, development and production hubs.

And if I could follow on from that, if I may, you talk about 11 follow on prospects in the Barents Sea. Can you give us any sense of the average size of those prospects, perhaps relative to the size of the existing discoveries that you've made there?

Yes. I think you know that is -- that we are in the Barents Sea so we need reasonable reserves to drill exploration wells for the future development. So we can say that we are more or less in terms of potential target in the same size of volume of what we drilled until now. You know that the range is between 200 million and 250 million barrels in terms of reserves, so that is our target in these kinds of prospects.

Thank you very much.

Karim Rahim, Barclays.

Two questions, if I may, the first on the Galp. And specifically, I just wanted to ask about your thoughts on the exchangeable, whether you decided if this should be mandatory or not. And any color you could give us there, that would be appreciated.

And then second on Snam, maybe you could just give us an update, Alessandro, on the discussions that you're having with the banks in terms of the bridge financing for Snam, how that's progressing, and if there's anything that we should be aware of there?

Thanks.

Well, for Galp, of course, we are starting the project, including evaluating what could be the most appropriate strategies to be applied in order to monetize at least a portion of our stake. But I repeat starting from the situation whereby today the present market price do not meet our minimal expectations first.

Second, in terms of convertible, we do not exclude the possibility to apply for a convertible, to place a convertible bond. That is not mandatory to record to -- a convertible bond. It's just one of the strategies which we can apply in monetizing our stake, but so far, is not in our rather screen, the placement of a convertible with Galp shares.

Then as far as Snam, Snam, your question, I can understand your question of course, but we are not the appropriate entity to who you can place your question, you can raise your question, because of course we are cooperating with the Snam, but the entity, the company who is presently engaged in setting up their appropriate bridge financing is Snam itself.

As you know, Mr. Malacarne, just if I will remember yesterday, has already disclosed that they are working in order to get an autonomous rating very soon, and then as soon as the rating will be obtained, they will start actively in placing their debt in the market.

As far as we know, as to our knowledge, since I repeat we participate with them in the meetings with the banks, they are progressing extremely well. Of course, their reputation of the Company and the solidity of their balance sheet support extremely well the possibility to obtain an appropriate bridge financing at the very interesting price very, very soon.

Great. Thank you.

Jason Kenney, Santander. Mr. Kenney is not available at the moment. Mr. Michele Della Vigna, Goldman Sachs.

Thank you for the presentation. I'd like to ask two questions, if possible. The first one, Claudio, could you update us on the Kashagan development and what you think will be the key milestone to achieve the stable production rate of 70,000 to 80,000 barrels per day by the end of the year?

And the second question really is for Alessandro. In these Q1 results, the only slight disappointment was R&M and Chemicals within a very good set of results. I was wondering, not to worry about one month into Q2, do you see any improvement in those areas or the situation is likely to remain as challenging?

Thank you.

So we start from Kashagan. Kashagan, I think that we can give very positive news. One of the main milestones was the hookup, and the hookup is practically finished. We will be completed in -- 95% in April and the rest in May, so the hookup is completely finished.

We already start testing all the line with gas, so the gas is [on the R&D]. We can also now [practically] say that the commission is going very well, so without any big issue. One possible issue was the asset integrity of the [packages penalized] in 2008, and we can say now that there is no problem. The asset integrity test has been passed positively just last week.

So I think that is really -- we are in a good shape, and good shape means that to reach the commercial production of 75,000 barrels a day by December, we have to start production around the first week of November and ramp up. And all the team, all the management is really focused in following this last step on a daily basis. And my visit every month, and my colleagues that I can say every two weeks from the headquarters, so there is a very full support.

So as far as Refining and Marketing and Petrochemicals, as you correctly stated, we have experienced a quarter of quite disappointing results, but not -- for sure, not due to our performance. The performance, the industrial performance in both the segments have been extremely satisfactory.

Unfortunately, both of them have not been assisted by the scenario, the market scenario, which have both for Refining and for Petrochemical, the scenario which consists predominantly in the high cost of the oil which represents the cost of the raw materials for both of them, have negatively more than in the past affected their results.

Then what we are assisting now, in particular immediately after the closing of the quarter, is our sign of the first improvement, both in Refining margins and in the Chemical market. So all in all, we'll remain a little bit pessimistic for the entire 2012, but not for sure with the same -- in the same magnitude that we experienced in the first quarter.

So the first sign of recovery which we are looking at, and in particular in April, we hope that this situation will continue all over the rest of the year allowing the possibility to recover a little bit of the very negative situation we have experienced in the first quarter of the year.

Great thank you.

Nitin Sharma, JPMorgan.

Good afternoon, gentlemen. Two questions, if I may. First, you sign an MoU with PetroChina last year, and if I'm not mistaken, the objective was to look at unconventional blocks in China, of PetroChina projects in Africa. Any progress on this front?

Second, recent events in Argentina on nationalization at all, does it have any impact on either the time line or the scale of investment plans that you have for your projects in Venezuela in terms of your risk perception?

Thank you.

Okay. So both questions for E&P. PetroChina, I think that we are progressing there, working there. When you have to -- this [cooperation], this MoU was to have an exchange of blocks of data, and when you're analyzing [NP] data, it's a question evaluation and test. We are working positively, I think. I hope very soon we can find a good result horizon for them. So we are working --

I remember you that we have also an MoU with (inaudible) that is more or less on the same lines.

So we are working and we are working well. So we are quite confident that we will have access also to the shale gas in China.

For Venezuela, I really -- I don't think that will have any impact also [issue]. Only the press, I think that you read the declaration and announcement of the minister and of the (inaudible) that they said that -- they confirmed that they don't change at all any terms and condition of our agreement. And they did that immediately after they knew that -- not from Argentina's, that means that it's a very sensitive problem for everybody.

They want to have an international company working with them. We are working quite well with them vis-a-vis --we are progressing working very well on all our projects. So I don't have any negative perceptional or feeling as far as Venezuela is concerned.

And, Claudio, if I may just add one more. Any updates on Iraq pace of development?

Iraq, yes. Iraq is -- when we talk -- during the strategy presentation we didn't talk a lot. We were not very happy about the slowdown and the [slower pace] of our presence in Iraq especially because of bureaucracy. In the last month, I think that it is quite better. We are progressing. They approve some very important contracts for us in terms of building and the early facilities for production for oil treatment.

So we are moving on, and I think that we are in a position to confirm our target, production target for Iraq in 2012, that considering the price as it is about 17,000/18,000 barrel per day [equity] production.

Thank you.

Mr. Jon Rigby, UBS.

Two questions, please. The first I guess is for Alessandro. Can you explain to me how it will work once the split with Snam takes place with the debt that you have that you lend on to them. Will you go into the market and retire that debt, or will you keep it? Can you make some money actually on retiring it I guess, given where the markets are? Can you just explain to me a little bit about the mechanism of that?

The second is on Kashagan, just a follow up on that. Could you explain how many people, or just confirm how many people you have working on there at the moment and contrast that with how many people you would normally expect to be working on an operated JV? And just maybe contextualize it by where those people are likely to go and how quickly once first production is reached.

Thanks.

So starting from your first question, with reference to the repayment loans, we have granted to Snam. As you know where all the loans that we have released to Snam includes -- have a clause whereby as soon as the Company will not be considered a subsidiary of Eni any more, the Company has a maximum time of six months in order to repay entirely the existing debt. Okay? And of course, the Company is actively and efficiently and positively working in order to be able to satisfy the contractual provision.

Then as soon as Eni will have repaid back the entire amount, what we will we do with this amount? For sure, as a first step, we will repay those loans granted by banks which carry the higher financial costs. And then for the rest, we will increase our liquidity, as many other energy companies, oil companies, our peers group, the liquidity that they have and it is useful to have, must -- is an amount which should be enough to cover at least one year of spending.

Today, we have a much lower situation, but for sure, as soon as we have the cash coming from the repayment of the loans from Snam, our strategy is to increase significantly our liquidity in order to be able to face any potential change in the market, even when in case of very negative -- when the financial market should move or can move in a very difficult situation, because we are convinced that the troubles which affected the financial markets recently, that the troubles are not over. We are still in a quite difficult financial environment, so it is better to face the future with a strong shoulder.

So for sure, we will keep on board most of the cash coming from the repayment of the loan increase in the liquidity of our Group.

Okay.

Kashagan. Now we are about considering any staff in the right -- contracted staff we are about 2,000 people, direct [trainees] is about between 600 and 700. Until June, I think, June next year, we'll have these people. We start demobilizing and I think in January/February next year, because we have all the 2012, all the 2013 the ramp up, so we have to leave some people of our team overlapping with Shell and KMG people.

That will take over in January. The team of Shell and KMG is already in place for some years, so they are working with us.

So we have these people. We reach production, the full production in January, the ramp up, and we start demobilizing in -- sorry, in January 2014, and we start the demobilization in January 2013. So in one year, we are going to demobilize all our people.

We need these people because you know that we are -- a lot of these are in hubs, [an inspiration] and development and production, starting from Mozambique, Barents Sea, so I think that a lot of people that now are working in Kashagan, that will work in Russia and in Barents Sea, and also somebody in Mozambique. So that are the three main hubs where we use our people in the future.

Okay, that's interesting. Thank you.

Neill Morton, Berenberg.

I have two questions on Mozambique, please. Shell were quite clear yesterday in saying that their bid for Cove was an opening gambit in terms of increasing their stake in the future. You've previously said that you would like to be operator of a combined development. I just wondered what your thoughts are of a big LNG company moving in next door.

And then just secondly a clarification on that Cove deal. They recently got a ruling regarding the capital gains tax of 13%. I just wondered to your -- as far as you're aware, is that an ad hoc ruling with regards to Cove, or would that also apply to Eni if you were to sell down your 70% stake in Area 4?

Thank you.

The first, talking about development, we said that we'd like to develop our resources, and that is clear for our experience and for our knowledge of Africa and our knowledge of the offshore. We're doing [mine] also with Anadarko, a joint operatorship, and that is for the upstream.

For the midstream, as you know, worldwide, normally there is a company or a joint venture, it's normally a company, where -- through which we develop the LNG, like we did in Angola or in Nigeria, or Egypt, so that will be the way through which we are going to develop the LNG.

So I think that if Shell will be with us, it's welcome. We work with Shell and we start working with Shell in the LNG big project of Nigeria in 1992/'93, so some 20 years ago. So it's a good and knowledgeable and reputable partner that we know very well, and I think that is one of the first companies doing LNG. So I think that is a good point for the joint venture, for everybody, if they join us.

On the tax?

For the taxation. I assume that -- I don't think that there is a [law] that would be (inaudible). If there's a bill there's a bill, so I think that will be valid for everybody.

And if we are going to reduce our share, we have to pay this tax, but at the moment as we repeated several times, now we are focused on what we have to do, not on selling. We don't want to sell; we don't want to reduce our share. We want to keep a strong position in Mozambique.

Great, thank you very much.

There are no more questions. Ladies and gentlemen, the conference is over. Thank you for calling.