埃尼石油 (E) 2022 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Eni's 2022 First Half Results Conference Call, hosted by Mr. Claudio Descalzi, Chief Executive Officer. (Operator Instructions)

I am now handing you over to your host to begin today's conference call. Thank you.

Thank you. Good afternoon, everyone. Today, we will focus on 3 aspects of the year-to-date. Firstly, our execution on strategy mainly volatile economic and geopolitical conditions; secondly, the financial results that underpin our ability to invest and pursue our strategy across the cycle; and thirdly, our delivery of competitive returns to our shareholders.

In a market characterized by extreme volatility and complexity, we continue to progress on our strategy with effectiveness and determination. Technology and its fast track deployment is a key element of our transformation. And in the first part of 2022, we delivered 3 major success (sic) [we believe 3 majors of access]. On LNG, with the on plan and budget start-up of Coral, offshore Mozambique, we have opened a new part for this country and develop a leaner LNG offshore scheme. This experience gained from this project will allow us to replicate a similar scheme in Mozambique in other countries by accelerating the time to market of gather sources and reducing financial exposure. We sanctioned the Berlin project and Côte d'Ivoire, just 4 months after its discovery. It will be the first net zero development in Africa for Scope 1 and Scope 2 emissions.

After a production test on the prize well, we can confirm the potential of at least 12,000 barrels per day, an increase of hydrocarbon in place to around 2.5 billion barrels of oil and 3.3 Tcf of associated gas. We expect first oil in the first half of 2023.

And on future breakthrough technologies, the SPARC magnetic fusion plant constructions is underway in Boston with a planned start-up in 2025. Eni is the largest shareholders in the CFS ventures and the successful $1.8 billion funding round at the end of 2021 will carry the venture through this important stage of developing a new source of clean energy.

But our transformation is not limited to the deployment of technology. It also requires construction of new financially attractive business models to capture new investors and new sources of capital that will help to accelerate our growth. The success of Vår Energi, the largest IPO in oil and gas company in Europe in over a decade, is an example of our business combination model that we want to replicate. With Azule, the partnership between Eni and BP in Angola, we are creating an African giant. All the conditions are close to be met and its formal establishment will take place in the next few days.

With an average production of around 250,000 barrels per day and great potential of synergies in exploration, operation and development, Azule will be one of the strongest upstream players in the years to come. We are also advancing in the creation of our company dedicated to sustainable mobility, targeting completion by the end of this year. This company, together with Plenitude in the retail household business is functional to reach a net zero Scope 3 emission in mobility. With the first vegetable oil producing in Kenya last week and the development of network or agri-hubs in Africa, we are on track to securing diversified feedstock to expand our bio-refining capacity and we will reach a target of 35% vertical integration by 2025.

Gas security is the key topic of this moment. The recurring concern for government, customers and investors. Eni was already progressing with the replacement of third-party volumes with new equity gas and after the invasion of Ukraine, we further accelerated this plan of substitution. We move quickly, leveraging our huge discoveries and strategic relationship.

We signed new gas supply arrangements with Algeria, Egypt, Congo. In just last month, we entered Qatar's North Field, the world's largest LNG project. The initiatives are designed to deliver up to 20 bcm of gas supply by 2025, effectively in covering 100% of 2021's Russian gas import. This gas will be produced in projects where any has a material upstream stake, securing diversified supply to meet customer needs with also boosting any returns.

Focusing now on the gas market itself. In order to protect company from disruption in the short term, we have increased the flexibility and resilience of our delivery chain. On top of diversifying our gas sourcing and filling storage, we fill in storage well ahead of winter. We have also diligently addressed our financial position.

We have carefully managed our exposure where we deviate from our most hub-based pricing model. We have addressed potential mismatches in our supply commitment, and we have ensured our financial hedging is consistent with our physical supply. To really place this in perspective, I want to emphasize that the company's remaining 2022 contracted obligation can be fully met with no Russian sources without any additional cost.

Alongside managing unprecedented level of market complexity and moving on with our transformation strategy, we continue to deliver excellent results. EBIT for the first half was EUR 11 billion and for the second quarter, EUR 5.8 billion. We have generated EUR 10.8 billion of CFFO in the first half of the year, fully funding our CapEx of EUR 3.4 billion and our year distribution plan. Importantly, our financial performance was not just in our upstream division, but also balanced with significant contribution from GGP in the first quarter and R&M in second quarter.

To this, we can add growing support from our associates that emphasize the emerging value of our satellite model. Even with the build in working capital resulting from higher gas prices impacting both seasonal gas storage and sales, plus the effect of various portfolio activities, we have reduced our net debt, which now stands at 15% leverage, confirming our financial resilience and offering strategic flexibility.

Upstream capture the improved scenario and maintain disciplined cost management to deliver almost EUR 5 billion of EBIT in the second quarter. As we continue to focus on high-value activity, we also expect production to increase in the second half of 2022, thanks to project ramp-ups, for instance, Coral in Mozambique, Ndungu in Angola plus production to come on stream from working fast track activity in Nigeria and the reduced impact of major turnaround that affected Q2.

Second quarter was also impacted by force majeure in Libya, Nigeria and Kazakhstan, which substantially explains the production shortfall against our expectations. In addition to the start-ups, we have made progress towards FID in the second half 2022 for the Marine XII fulfilled in Congo, Meleiha Phase 2 in Egypt a number of new projects in Angola plus the next Karachaganak expansion in Kazakhstan. Our exploration activity continued to yield excellent results. We have discovered 300 million-barrel of resources in the first half.

The second half 2022 has already started on a very positive note with the first appraisal well at Baleine. We are raising our guidance for discovery of sources for the year at 700 million barrels. After a very good first quarter, GGP broke even in the second quarter, as expected, we see second half EBIT skewed toward the last quarter as in the normal seasonal pattern.

The second quarter was a standout quarter for Refining & Marketing. It benefited from a robust scenario, but the results are really driven by a major increase in the utilization rate of our Italian refineries which is 20 percentage points higher than Q1 at 90%, and our management of energy cost impacted by high gas prices. In the first half of the year, we saved EUR 200 million through energy supply optimization.

In May, we also restarted our Gela biorefinery ahead of plan, contributing to the capture of favorable market conditions.

In Chemicals, despite a challenging market, Versalis has delivered positive results thanks to improved margins on polymer and proactive mitigating action on cost and energy users. As a reminder, our investments for making Versalis a fully sustainable and differentiated company and focus on 4 strategic areas: specialties, circularity, biochemicals and efficiency. In this context, by 2025, added value products will grow to over 40% of portfolio.

Plenitude continues to grow its renewable installed capacity by almost 35% year-to-date and on track to add more than 2 gigawatts installed by year-end. In the quarter, Plenitude delivered EUR 190 million in EBITDA, nearly 50% above 2021, thanks to its growing renewable contribution and retail performance featured strong sales in solar distributed generation and energy efficiency services. We continue to see additional strategic value in a listing of the company, and we confirm it remains our intention to pursue an IPO, subject to market conditions.

In line with the commitment we made in March, we have updated our assessment of the 2022 buyback upside price scenario, taking into account the Brent price to date and the expected trend, market fundamentals and potential risks. Accordingly, we are announcing an upside Brent price of $105 per barrel for the year as the basis of the incremental free cash flow to be distributed. In addition, the stronger foreign exchange rate and the strength of refining margins and the gas price led us to conclude that a larger EUR 2.4 billion program, an increase of EUR 1.3 billion versus our original target is appropriate and consistent with our strategy.

Based on the current share price, our dividend and buyback correspond to a distribution yield of 14%. We expect the buyback to be completed before the end of Q1 2023 and confirm we will further update our scenario and plan at our Q3 results in October.

I will now summarize our updated guidance before concluding. 2022 production guidance is 1.67 million barrel per day in line with the original 1.7 million barrels per day when adjusting for the risk of ongoing force majeure interruption mostly particular -- both particular in Nigeria, Libya and Kazakhstan.

We expect Q3 production to be broadly in line with the annual average. Exploration is expected to be the regional outlook with at least 700 million barrels of discovered resources. Now see at the cost of around $1.5 per barrel. We confirm 2022 GGP EBIT at EUR 1.2 billion, a figure we raised at the first quarter and Plenitude's full year EBIT at over EUR 600 million.

Business action and favorable market conditions for R&M allow us to materially improve our guidance to an adjust perform EBIT now expected between EUR 1.8 billion and EUR 2 billion. Looking forward, we are raising our guidance for 2022 cash flow from operations pre-working capital to EUR 20 billion at $105 per barrel. Underlying annual CapEx is unchanged from the original plan and expected to be EUR 8.3 billion as an update for an exchange rate assumption. We also confirm our 2022 dividend per share of EUR 0.88. And as I have just disclosed, we will announce total distribution with a share buyback of EUR 2.4 billion to be completed before the end of the first quarter 2023. Leverage is expected to fall further to end the year at around 13%.

To conclude, we have delivered significant strategic progress over the first half of 2022. We have continued to secure the long term for any, especially in the context of new gas supply while protecting it in the short term from the effect of the market volatility. We are moving forward in our energy evolution business, growing Plenitude and establishing a stand-alone sustainable mobility company.

Our excellent financial delivery is critical to funding new investment plan through the cycle, being a reliable supplier of energy to our customers in all scenarios and delivering on our commitment to our shareholders. So now I conclude my remarks, and we are ready with our top management to answer your questions. Thank you.

(Operator Instructions) The first question comes from Irene Himona of Societe Generale.

I had 2 questions, please. Firstly, can you say what the cost of the various windfall taxes are for any this year in Italy, but also the U.K.? And then secondly, on Plenitude, I mean, should stock market conditions remain difficult for an IPO over the next 12 months? How does that impact any strategy? Would you then instead consider selling to an industrial partner perhaps?

Francesco, I'm going to ask -- ask about -- answer about the tax, and then I'll say something about Plenitude.

Yes. The sum of the 2 taxes is in the range of EUR 800 million on a yearly basis. You know that we have already paid an installment related to the first payment of the Italian taxes while the second part is the 40% of the taxes that was in the range of EUR 500 million and the remaining part will be paid in the -- at the end of November. And clearly, the same will occur for the U.K. taxes.

So for Plenitude, clearly, what prevented us to go ahead with the IPO was clearly the market condition volatility, we are still there, maybe worse than before. And we are convinced and determinated to go ahead when the condition will be established with the IPO. But we have to say and highlight that the strategic move is Plenitude. It's not the IPO.

IPO is clearly -- is a good tool to give value and independence to the company, but the strategic move is Plentitude itself because it's our -- it's functional to our aim to sell decarbonized product, green, blue and biogas to our client to reach the net zero in our country. So the strategy is Plentitude and then we have a tool to give additional value that the IPO. So we go straight with our strategy to increase renewable and what it's doing because trend is increasing at a very good pace, the renewables, but that is the strategy. I'm sure that we are going to find a good window of opportunities for the IPO. On the -- if you are looking at other ways, at the moment, we are focused on develop our company are the best, and we'll see what we're going to do in the future.

The next question is from Oswald Clint of Bernstein.

Just in the context phrase of gas security. I wanted to ask about Mozambique again the Galp's Chief Executive keeps continuing to see your praises on Coral LNG. But I wanted to get your thoughts on the potential for, let's say, another Coral floating LNG facility. And also even on the onshore, are there discussions around smaller or mid-scale LNG trains at Rovuma that could perhaps allow you to get this project away on a shorter time period than many people expect. That's the first question.

And secondly, good evidence of the natural gas reduction here in refining and chemicals. I wonder if you could just quantify how much percentage-wise you've been able to reduce? And actually, even on GGP, I mean Europe is now trying to reduce demand by 15%. I think you've seen some decreases in Italy and France in the second quarter, but increases in Germany. How do you think the demand for your sales for gas plays out certainly through the second half of the year, please? I know you've given the guidance for GGP, but that's just an overarching question.

So thank you. I'm going to answer for Mozambique. And then my colleague, Pino Ricci and Cristian will answer for the remaining questions. So we are discussing -- you know that we are working on the onshore and in our joint venture in our companies were excellent and the other company were in charge of the upstream and the offshore.

Clearly, we are discussing. We are proposing a possible additional offshore development through the same fast LNG that we are developing in Congo. So something that is very fast, small size that we can replicate, size that can range between 2.5 million and 3 million tonnes per year. So that is something that is on the table we are discussing. I can say that among our partners, there is a positive view, but we have to wait for a final approval, but that clearly is a way to go faster and develop LNG in Mozambique. We have a huge amount of reserve there.

At least in our block, we have about 80 Tcf. So you can imagine that is the moment. So we are really focused and determinated to go through these developments. For onshore, onshore is not in our end. Clearly its in the end of Exxon, the big train, all the engineers, everything has been done. I think that is just a question to understand if we find a reasonable security condition to develop this activity. But if we think about small size, I think that the offshore, we demonstrate the offshore the faster one. So I think that -- I never thought about small train onshore, but I think that a good way because there is no constraint is small size offshore LNG.

So now I turn to Pino for the other answer.

Thanks, Claudio. About the gas reduction in the refineries, our reduction reached more or less 70% versus the previous one. This was a pathway started last year when in the second half of last year, we started to -- the spike of price 70%. And so when the Ukraine-Russian war started, we were already very strong to push again the reduction of gas consumption in the refinery.

On a yearly basis, this means approximately 0.6, 0.7 billion cubic meter of consumption. If you consider that in the same time, we cross from a utilization -- a minimum utilization of the refineries because low-margin COVID low consumption and so on, to a big jump to the maximum utilization because the lack of Russian gas. And so the combination of the 2 factors allow us to reach these results and take into account that, for instance, our Sannazzaro refinery today has gas import close, completely close.

Pino means that in Sannazzaro, we are producing synthetic gas, and we replace gas with other less expensive feedstock, energy feedstock. That is a secret. And then we jumped from 70% utilization rate to 90% utilization rate. So this action has been really important.

And that explains also the difference between the consensus and the result, the same in Plenitude, but I think that we can also explain that. Then there is a question about gas. So Cristian can answer. Cristian and maybe Stefano, yes.

So on the gas demand side, as you pointed out during the first 6 months of the year, in Europe, substantially the, let's say, the overall demand has reduced. Well, differently in the different countries because I mean, we vary between, let's say, for example, in Italy, the drop was around 2%. And in Northern Europe was actually a bit more. The reason behind that was a bit a warmer winter than last year. So we had less consumption in the -- in the household segment.

And clearly, after the spike of the prices, we have seen also some reduction in the industrial demand. Actually, Pino was talking about what we have done on the refineries to reduce the demand, and this is happening clearly a bit across the board, and we see a reduction of around 10% on the industrial sector, especially in the very high energy-intensive sector.

Going forward, clearly, we acknowledge the agreement at level about reducing the demand. And for example, I mean that again, depends a lot on the various countries, for example, in Italy, even the specificity of Italy, this 15% actually boils down to 7% reduction. But the way we see the impact of the demand, the reduction vis-a-vis our accounts, we think that there is actually a marginal impact on that because, I mean, we will have maybe less revenues coming from the margins to our sales. But on the other hand, we are going to gain from optionality vis-a-vis the wholesale market and reduced capital absorption. So not a big element.

The next question comes from Mehdi Ennebati of Bank of America.

Congratulations for the strong results. So 2 questions, please, on my side. First one, I am trying to understand the potential impact for Eni in case of a gas price cap for household in Italy, given that you are involved in gas distribution in Italy. So can you please remind us what is your market share on gas distribution for households? And can you also tell us if you hedged or not, you're selling price to your customers via derivatives? Or if you have to sell the gas to the spot price?

In fact, I would like to know if in case of a gas price cap for household, will you have to pay? Will you have to subsidize the households? Or does it exist in other, let's say, organism which can, let's say, take that potential costs? And second question regarding your renewable diesel business. So I remember that in February, you told us that in 2021, that business had a negative EBITDA contribution. What about the first half of 2022? Are you seeing some improvement here? Or would you say that the situation remains quite difficult because of feedstock cost inflation?

Okay. Stefano Goberti is going to answer to all the questions.

Thank you for the question. In terms of gas price cap, very difficult to comment on a measure that needs to be implemented first to be commented upon. On our side, we sell gas to residential both on a fixed price and in that case, of course, we hedge or on a variable price index to the PS group. So in that case, we are naturally hedging in our portfolio.

We have been managing a lot during this first 2 quarters the -- to energy management, not to get hit by the volume risk. And I would say we have been successful because the result in the quarter have been very positive. The second question on the renewables. Last year, we had a minus EUR 10 million result on EBITDA, this first 6 months, plus EUR 90 million because of our generation and the prices that we are able to capture because of the unique model of Plenitude or putting together merchant position on the renewal together with the client base.

And if I may, just to come back to that gas price cap, let's say, subject you said part of it, part of the gas installed at a fixed price and then you hedge and you also have an exposure to the variable price. Can you tell us roughly what is the proportion of your exposure to the variable price?

But this is quite commercially sensible information. So I would refrain for saying.

Next question is from Alessandro Pozzi of Mediobanca.

The first one is on the buyback. You've increased it quite significantly to EUR 2.4 billion. Would it be fair to say that basically any additional excess cash generation is going to be deployed through buybacks rather than an increase in dividend. And you're happy with the -- with the split between dividend and buyback at the moment, given that the new dividend policy was introduced about 2 years ago? And also in calculating the EUR 2.4 billion, are you -- can you maybe give us a sense of how you got there, whether you're targeting a specific percentage of cash flow over the -- you want to be above a certain level when it comes down to the leverage.

The second question is on gas demand, we've seen the Europe announcing a voluntary 15% reduction. In Italy, as I mentioned, is 7%. But mean how exactly is going to be implemented at 7%? I'm asking you because your one of the largest retailers of gas. So how do you think that the 7% voluntary demand in Italy can be implemented?

So the first question is for Francesco on the buyback and also additional possible distribution, dividend. Francesco, you have lot of things to say.

No -- thank you for the question. Actually, you know that we presented a distribution policy in line with our strategy presentation, our strategic plan. Clearly is built with certain rules. We set the rules at the start of the game, and we do not change during the game. So the next update will occur clearly with the next presentation.

What we presented is a mix of tools. You know that we have a dividend policy that is mix composed by a fixed and a variable element. We designed a buyback, and we announced in March of this year that we would have progress of this buyback in line with the price reference. This is actually what happened during this quarter. So we do not expect to change the rules and therefore, to change additionally these terms. About the calculation, just to give you some clarity. We announced last March that at $80, we would have between EUR 6 billion to EUR 7 billion of free cash flow.

By now moving this EUR 6 billion to EUR 7 billion, that was actually a EUR 6.4 billion at the time to the $90 that was the minimum where we do not change the distribution of buy back we would have reached almost EUR 7.7 billion. Now you know that we have announced that our free cash flow will be EUR 10 million it means -- sorry, EUR 12 billion. It means that we have EUR 4.2 billion, EUR 4.3 billion of free cash flow. Multiplying this by 30% brings you to the EUR 1.3 billion increase that is the sum that we added to the original EUR 1.1 billion. So this is the drivers of the calculation that we have applied.

So on the second question about the 7% reduction. Honestly, we can't answer to this question because there are a lot of different points at least, and so we cannot talk about implementation, why? Because we don't know. So it's something that we have to wait in the ministry and especially the regional to be ready.

So the impact on us, you didn't ask the possible impact of this reduction. Clearly, we have a flexibility why because we send to Italy LNGs and production that we can divert we can change the destination. So if there is a reduction of 7% of gas, we have the possibility and flexibility to sell this gas somewhere around.

The next question is from Martijn Rats of Morgan Stanley.

I've got 2 questions, if I may. First of all, -- would it be possible for you to sort of briefly sort of summarize the sort of Russia risk as in -- like if Russian gas volumes to Europe, including Italy, were to go to 0, how does that actually cascade through the company? I think there's a sort of broad amount of sort of misunderstanding about that. But -- and therefore, I think it will be useful if you could sort of briefly explain it to us all. And secondly, about the Baleine discovery, it sounds quite large. I was wondering if you could say a few words about it in terms of time lines or plans? It looks promising.

Okay. So the first question will be answered by Cristian. The second one by -- with Guido Brusco that I hope is online, yes.

Russia. So let me say, first of all, we are, as you know, currently receiving around 27 million cubic per day of flows, and we can confirm that even at that flow, we can, let's say, confirm the guidance of EUR 1.2 billion EBIT by the end of the year. Then if the flows would actually reduce substantially from that amount, clearly, I mean, the impact will depend on a lot of variables and in price environment, regulatory framework and when actually this will happen. What I can tell you though is that with the current price scenario, in the event of a complete shutoff of the Russian supply from winter onwards, we will still expect to be at least free cash flow positive in 2022.

Guido, you can talk a little bit, elaborate on Baleine.

Yes, absolutely. So Baleine is clearly a world-class discovery, very good reservoir, high-quality potential to produce up to 12,000 barrels per day. We have already ongoing and early phase, which we are planning to start up in the first half of next year with production up to 15,000 barrels. And clearly, this appraisal campaign is setting the scene also for the second phase and its fulfilled exploitation, which we are planning at the moment to take an FID by 2023 first half and with a target start-up in late 2025.

Okay. That sounds great. Just -- can you talk off very briefly. So just to clarify, did you say the production potential of the field was 12,000 barrels per day? That sounds low.

No, no, no. The wells -- I mean, each well has a potential of up to at least 12,000 barrels, which is the one we tested right now in this well. This is just to demonstrate the confirmed the quality of the reservoir. The first phase is a very early phase, which we are doing with the vessel, which we have in our fleet. But clearly, the Feel field is something which will go well beyond 120 if not 150,000 barrel per day in the Feel field.

The next question is from Henri Patricot of UBS.

I have 2 questions, please. The first one, I was hoping if you could share your views on the refining outlook for the rest of the year. You used that reference margin of (inaudible). But We've seen quite a lot of volatility in the last 2 or 3 weeks, shop collection seems to be improving in the past weeks. What do you see the risk around the (inaudible) and in particular do you see any signs of demand restructuring in your own retail network?

And then secondly, to come back to the question of the gas supply and all these agreements that you've agreed for the last few months and whether there is room to accelerate some of these increased supply in particular in Nigeria you continue to have some discoveries on the upstream side. So could this increase to up to 6 to 9 bcm a big forward to some extent?

Yes, about the refining margin, of course, the so high volatility is due to the current context that has 2 main drivers. First one is the very high price of gas. And the second is the war. With the leak -- of the availability of our Russian product in the market, the European market. What we expect in the next half of the year is that the gas price will remain very high and could affect the margin.

And against this, as we told before, we reacted with a very strong reduction of the gas consumption. And secondly, we expect a certain decline of the correct spread of product, gas oil and gasoline. But even if the demand of gas oil will remain strong also in the third and the fourth quarter. So at the end, we expect that in the second half, the margin of refining could be around $5, $6 per barrel average considering average -- yearly average. That it means that we continue to be quite robust also in the second half, of course, not as the second quarter, but in any case, a very positive refining result.

Okay. So thank you for the question about the gas supply. I take the opportunity to give maybe a larger view on the model that we were changing starting 7, 8 years ago, and -- so the 2 models. One is to buy gas from a third party, so Russia, and be on the value chain and sell our gas. So our equity gas, gas for which we run exploration, development and production. So now we are setting also the contract that we signed that were -- that concern the destination were just linked to the -- our equity gas, the development we are running in the countries.

So the question is how we can accelerate it. So clearly, we set some program in terms of plus 3, plus 3, plus 3. I talk to just about Algeria and now recently, additional EUR 4 billion. In these quantities, for Algeria, we are considering our equity gas plus solitary equity gas and development that are ongoing.

How we can accelerate, we have discovered more and Nigeria is very not easy to discover, but once you discover it's very easy to take in because there is a strong network -- pipeline networks and plant. So recently, we discovered gas in Algeria, retain more than 4 wells. We are working our concession, but we are also helping working very well in good coordination with Sonatrach. So could be possible to accelerate and increase this quantity.

It's something that we're going to see over the next months. The same kind of concept is -- it can be applied for Egypt, for example. Clearly, Congo is more limited because we are building the LNG, but I think that this is likely to be happen because we have a lot of recent discoveries. So that can happen. I cannot tell you now possible details. Maybe we can disclose in the next months .

The next question is from Massimo Bonisoli of Equita.

Thank you for taking my 2 questions, both on gas. The first with reference on Page 13 in the annex of your presentation. If you can give us some color on the commitment on your gas customers. Can we assume the main commitments are mainly for the B2B and planning to the stream? And the second question regarding the gas derivatives and the margin call. Can you update us on the effects on net working capital, which was supposed to draw about EUR 1 billion in 2022 according to Q1 conference call.

Okay. Thank you. For the answer -- the first for Cristian and Stefan and then Francesco.

So on the commitment of the gas sales, let's say, yes, we -- most of our commitment are basically with our own consumption. So let's say, for our Plenitude, for our Eni Power business and for our Refining and Versalis business. So this is -- let's say, this represents the bulk of our, say, commitment. Then we have also commitments coming from long-term agreements that we signed with shippers a few years ago and they are still in place, and they will, let's say, fade away in the next years. And then we have some commitment with industrial customers, B2B customers, as you call them, but those are, let's say, a minority in that flow chart.

Yes. Massimo, if I can add, I can only add that 100% of our gas supply for Italy and France comes from Cristian. So we have the security of supply on this case.

See about the working capital. You remember last that we have this, let's say, positive contribution from the what's called the cascade of the rebates and particularly on power. This clearly has impacted negatively this year -- will be -- will move during the year. And we expect to have a negative impact related to that of EUR 1 billion, clearly included in our estimate of free cash flow in particular on the power, but there will be also a recovery -- partial recovery on other derivates that are cascading the opposite sense in the range of EUR 300 million, EUR 400 million. So that is the overall impact.

In terms of margin calls, I can tell you that we are well covered. We have just at the current level of pricing, something in the range of EUR 2 billion, EUR 2.2 billion of cash absorbed but you know that we have also EUR 20 billion of liquidity capacity. So we are quite protected from any potential jump.

Next question is from Bertrand Hodee of Kepler Cheuvreux.

Yes. I wanted to come back on the gas from related financial risk. I am a bit confused. Claudio in your preliminary remarks, you stated that I can fully meet all of its natural gas contractual obligation, even with you or Russian gas on a go-forward basis and without any additional cost. And then when Martijn asked the question, on the potential share of Russian gas and the potential impact on Eni, it looks like there could be an important financial impact. So hopefully, -- can you clarify, please? .

Yes. No, clearly -- I'm Francesco, I'm clarifying because there are clearly 2 different levels. The 1 that was mentioned in the presentation and Claudio stated is related to the physical obligations. So we are able substantially to cover in the case of interruption of Russian gas, our commitment with no Russian additional contribution. With existing contract because substantially what we have done since the beginning of this year as soon as we have seen at the start of the crisis, we substantially, let's say, create flexibility along this chain. The flexibility is not to take additional commitment is to look for additional source of supply. And on the other side, also from the financial point of view in terms of derivatives to interrupt coverage. So derivatives, let's say, buying in terms of these gas sales.

Actually, there were some of these past coverage that were taken before the start of the crisis. And this is the, let's say, the region of the impact that Cristian has mentioned. So there will be an impact from the financial point of view related just on to the winning of this derivatives but will be, let's say, relatively mild, taking into account that we have already substantially stopped and maintain as much as flexibility as possible.

And can you quantify those potential, I would say, worst-case scenarios of winding down those -- so winding down early those hedges and derivatives.

Really, as we said, it depends from many things. So it depends when it will occur, it will be occurred and what is the level of pricing. But at the end of the day, we are referring to a few hundred millions.

Okay. Perfect. I think it was important to clarify because I saw rates of [aid line] that in a case of disruption, and you will stay free cash flow positive at the group level. So I think you will be at free cash flow positive at GGP level.

No, no, no. Cristian was referring to the GGP level.

No, no. But I'm not saying that I understood that but I am saying it is the rate of aid [aid line] I'm saying.

Thank you to precise that because if we are just free cash flow of the group led is a serious problem. Thank you very much for the questions. So we have the possibility to clarify.

Thank you. Have a good day. .

The next question is from Giacomo Romeo from Jefferies.

Just 2 remaining -- just follow-ups really. The first 1 is on the buyback because you alluded to the fact that you could review your distribution at 3Q. But my understanding is that your -- the AGM authorization is for buyback up to EUR 2.5 billion. So I just wanted to understand how easy can this be moved and whether we could see a more material upside to the EUR 2.5 billion authorization that you currently have.

The second one is on the windfall tax in Italy. It's -- what's your perception of the risk of these windfall tax being extended until a longer period of time? And potentially changed in order to address a larger taxable base.

And I'm just -- the question really comes from the fact that the Italian government has talked about a much larger financial impact from this windfall tax than what it looks like it will be based on your comments and some of the other Italian energy companies comments. So I just wanted to understand sort of your view about potential downside risk on the windfall tax as we head into the winter.

First of all, about the buyback. I'm sorry, I'm Francesco again. You are correct. We have 2.4 so far, but a limit in terms of authorization of 2.5. So still, we have room, but it is 100 million. So in October, we will update the scenario and the performance, and therefore, there will be potentially this top-up in terms of buyback. On about windfall asset, first of all, we have 2 things that clearly we were work very hard and actually to provide security for the country.

So I think that if you look at the overall performance of Eni in 2022 in, first of all, in managing risk that is huge in finding new sources of supply that Azule Italy in particular, to have, let's say, a better condition so far versus other European countries in terms of security of supply. For example, you can see also from the alert level that is still at the level 1 in the country.

We have also -- we were able to fulfill our storage well in advance versus last year, practically absorbing EUR 1.6 billion of our cash in this quarter. And we intervened to support Saipem very recently with the capital raising.

So I think that we have made a very large and diffused activity that is going more than just on a windfall tax. We think that any kind of taxes should be, in any case, design in a proportionate way, in a way that is actually directly linked to profit that is most effective and most, let's say, clear way also for the investors.

Gentlemen, that was the last question.

Okay. Thank you very much.

Ladies and gentlemen, thank you for participating in the Eni conference call. You may disconnect your telephones.