Good afternoon, ladies and gentlemen, and welcome to Eni's 2013 First Quarter Results Conference Call. Hosted by Massimo Mondazzi, Chief Financial Officer [Operator Instructions] I'm now handing you over to your host to begin today's conference. Thank you. [Technical Difficulty]

Good afternoon, ladies and gentlemen, and welcome to Eni's 2013 First Quarter Results Conference Call hosted by Massimo Mondazzi, Chief Financial Officer. [Operator Instructions] I'm now handing you over to your host to begin today's conference. Thank you.

Okay, 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. E&P, production was impacted by a number of temporary issues mainly Libya and Nigeria. In Libya, while the situation remains challenging, production has been restored after the shut-in of Mellitah and now we are back in the region of 260,000 boe per day. In Nigeria, we have repaired pipelines damaged in the last year floods, although force majeure in the swamp area remains in place. With fourth quarter disruption now largely resolved and assuming no further shut-ins, we confirm full year production guidance. Growth will be driven by our expected start-ups and ramp-ups, which are broadly on track. At the same time, we have continued to consolidate our long-term growth prospects. Exploration discoveries amounted to around 600 million boe of resources and we have secured promising new opportunities, including our shale gas block in China. In Gas & Power, first quarter result reflected the deteriorating competitive environment. In Italy, demand has continued to fall by 5% in the quarter, driving up prices lower than those in Northern Europe. Meanwhile, our supply cost do not yet include the expected benefits of negotiations. On the positive side, we are performing well in resilient segments such as LNG, retail and new structured products, and supply-side negotiation are progressing constructively. We continue to expect to close a significant part of them in 2013. On this basis, we confirm our previous guidance of full year EBIT in line with the underlying 2012, which, as you may recall, was not a positive number. The downstream businesses have shown improved result from a combination of cost efficiencies, margin announcement initiatives and…

Operator, we will be pleased to take questions now.

[Operator Instructions] .

I am afraid we can't hear questions from the audience at this point. Give us a couple of minutes to resolve the technical issue. [Technical Difficulty]

Ladies and gentlemen, we are online again.

Our apologies for the difficult start. Please, let's proceed to Q&A.

[Operator Instructions] First question comes from Mr. Theepan Jothilingam from Nomura.

Three areas, please. Firstly, just come back to the Refining & Marketing result. Relative to the margins you showed sort of sequentially, seemed the sort of underlying profitability sort of fell. So I was wondering if you could give -- make any comments around that. And perhaps give an outlook for the performance of R&M for 2013 if margins are to remain unchanged from Q1 levels. Secondly, in terms of project start-ups, I think you referred to Angola, but you didn't really talk about cash again. There have been some reports, perhaps of possible delays there, if you could talk about that, that would be great. Where we are in the commissioning process? What needs to be achieved? And then lastly, again, a sort of a question in the market is could you talk about any update in terms of further sell-downs, either in Galp or in Snam?

Okay, so I will start answering your question about Refining & Marketing. As I said, the result we achieved in the first quarter 2013 has been, I would say, some way helped by the improving scenario and the effect of the restructuring process that, maybe you may recall, has been at length described during the strategy presentation. I am pleased to say that this restructuring plan is going ahead a little bit faster than expected. That's the reason why the result we achieved in the first quarter 2013 is showing this kind of improvement. And as far as the EBIT guideline in the -- for the full year, I would say that what we expect to have for refining and marketing is something that would be minus EUR 120 million in terms of EBIT, that would be cash neutral or something positive in terms of EBITDA. And maybe before handing over to Claudio, just to allow him to answer about Kashagan. As far as Galp and Snam, you probably understand that because of the sensibility of this issue, I wouldn't like to give you any further detail, unless confirming our willingness to sell down these shares, maximizing the value of our shareholders.

Thank you, Massimo. So let me say a few words about our -- states of our projects and then I will talk to you and elaborate about Kashagan. So if you remember, in our strategy presentation, we presented 8 main start-ups for this year. All in all, our project development is on track, with no major delays. And just to talk about project that started in the first quarter, I remember MLE and El Merk and, recently, CAFC. And the contribution of these 3 projects in Algeria will be on barrels in average 35,000 barrels per day in the next 3 quarters. Then we had, in Venezuela, the start-up of Junin 5, that will give a contribution of -- is now a contribution of 3,000 barrel per day, but almost 1 year ahead of schedule. And then we have -- we got recently Abo [ph] Phase 3 that started production in early April. That will give a contribution of about 7,000 barrels per day in the next 3 quarters. Now talking about Kashagan and the status of Kashagan. So the onshore facilities are being completed. Monitoring has been hand over to production. Dynamic tests are in progress and the facilities will be ready to receive her first oil by June. The 8 island [ph], which will provide the initial production to the project has already been hand over to operations. The island critical component have been already tested. And the first offshore processing train will be pressurized with sweet gas in June. Then the final dynamic commissioning activity will be carried out. So we expect the facility will be completed and fully commissioned at around midyear, I mean June, and the production will start in the following weeks when the handover will be completed. So what we think, on average, the contribution of Kashagan for us, in equity production for 2013, will be between 10,000 and 50,000 barrels per day.

Sorry, Theepan, just to complete your question about the result in R&M, I forgot to say that comparing the result of first quarter 2013 versus the fourth quarter 2012, the difference is due to the seasonality of the result being that the first quarter -- of every year are typically the worst one. So having said that, I confirm that the R&M result for 2013 is expected to be better than in 2012.

Okay, perfect. But I missed the contribution from -- did you say 10 to 15, 1-5?

10 to 15, 1-5, on average for the year.

Next question comes from Mr. Alejandro Demichelis from Exane.

So a couple of questions. You reiterate guidance on production for growth this year, but given what we have seen in terms of the one-off on the first quarter, you need quite an impressive growth in the next kind of 3 quarters. Claudio, you have highlighted the start-ups and so on, but maybe you can give us some kind of more indication of what you're seeing in Nigeria. What you're seeing in the waste production at the moment.

Okay, so as you said, we confirm our growth. And if you remember, at $90, our growth was about 3% and $110 we confirm the growth above 2%. So just to give you a general picture about, so the main contributor. So first of all, I want to highlight that what we lost in the first quarter coming from existing production that had been impacted by exceptional events and talking about Libya, we have a shutdown of 10 days and a not-easy ramp-up and we lost 30,000 barrels per day on average compared to first quarter, and more -- and about 60,000 barrels per day compared to the fourth quarter 2012. Now everything has been restored and the production is about 260,000 barrels per day. And really to confirm our growth, we need to keep these average production in Libya. For Nigeria, we lost 20,000 barrels per day in the first quarter. That's because of 3 different maybe events: is bunkering, is sabotage and flooding. So sabotage, bunkering -- sorry, sabotage and flooding impacted our pipeline, our network. And the network has been restored. So we recover most of these production. What remain uncertain in Nigeria is our swamp area because, as you know, we shut down all the production that arises, in average, between 4,000 and 8,000 barrels per day that is still there. But the rest has been restored. Then we have the ramp-up. The ramp-up of the field that started at the end of 2012 and there are probably a few that start in the first quarter, will give a contribution, on average, of 85,000 barrels per day. And then that is another important contribution that we already, so the existing production, plus the ramp-up. And then we have the new projects. The new project, we have, okay, new Angola LNG. We have Wafa in fielding [ph] and we have a series of projects that we already presented to give a contribution of about -- I'll tell you exactly, about 65,000 barrels per day. So that's overall. Plus the contingency that we have, because on the growth, we had a 42,000-barrel contingency. It's clear that we use part of this contingency to compensate the first quarter production. So overall, we are absolutely in a good shape to confirm our growth.

So just to follow up, what you're saying now is you have no contingencies left?

No, we have still some contingency but very few because we had to use our contingency in the first quarter. So our possible, critical point come from Nigeria. That is, we have to be clear, still a possible critical issue. But the flooding was an exceptional event and the flooding caused most of the losses that we had. So now everything has been repaired and the production restarted. Libya, so far so good. And I think that the production in Libya is quite strong. That are the 2 possible headcounts where we can have issue in the future. So the rest, I think that our growth is in line and, I repeat, we can confirm our guidance.

Next question comes from Mr. Alastair Syme from Citi.

Can I ask 2 questions. One just on the E&P, did you see a significant under lift in the quarter, if you look at the production sold versus the volumes produced? There seemed to be quite a big difference. And secondly, can I just clarify on Egypt, you referenced the Damietta issue, is this just an issue of not being able to push domestic gas into export volumes, is there more to it and how do you think that evolves?

Okay, so just to talk about the first question, and I think that there is no big difference about the production sold and the sales. It's clear that when you have to compare sales and production, you have to have a longer period because the over and under listing is something that you can compensate on the real -- on the [indiscernible]. So that is not absolutely a critical issue. For Damietta, it's not -- we sell production, our gas production in terms of E&P production to EGAS and then EGAS has a contract with Union Fenosa Gas, to sell -- to send gas to the LNG plant. So what I'm saying that the gas domestic consumption is not in our hand. What we are discussing with the minister and with the EGPC is the possibility to develop some -- our gas for Damietta, but that is in the medium long-term.

So you think, in the meantime, 2013, there will be no export volumes or very limited export volume?

I cannot exclude. That is really between -- the relationship between Union Fenosa Gas and EGAS, and the state gas company. I cannot exclude that. I know that there are continuous talking between the 2 parties, and it's clear that with the aim to find a solution for Damietta. But that is not in our hand, as a E&P side.

And so were there any exports in first quarter of LNG from UF Gas?

No.

Next question comes from Mr. Michele della Vigna from Goldman Sachs.

There were 2 really. The first one is I was wondering with the lower tax this quarter than what you were hinting at the Q4, whether that means that there is possibly going to be lower tax for the full year. The second question for Claudio is what are the key FIDs that you guys entitled to take for this year?

Okay, Michele, as far the tax rate is concerned I confirm the guideline that we gave to you during the fourth quarter of 2012, that it's been around 63%, 64% for the full year. I would like to remind that this tax rate was related to a $90 Brent scenario knowing that higher price with higher volumes and value produced in countries such as Italy and other country with lower tax rate will help us to reduce the tax rate and exactly what's happened in the first quarter of 2013.

Okay. For FIDs, until now, we got 2 FIDs. One is for the full development of Zubair field. The other is for [indiscernible] is a field in the Gulf of Mexico. And the following FIDs will be at the Block 15/06 west of phase 2, what we call phase 2, that is a second and additional FID considering the new discoveries that we had in the last year in the Block 15/06. Because we already sanctioned the West Hub, and now we have to sanction a phase 2, because we have to add to the cluster other structures. Then we have to sanction Jangkrik complex in Indonesia, really approved and sanctioned by the government, now we have to pass through the technical sanctions; and the Block 15/06 East Hub; and then the 2 blocks -- 2 fields in Russia: Yaro-Yakhinskoye and Urengoyskoye phase 2; and the last one is the offshore field in Italy in Sicily, Argo cluster, that, by the end of the year, that are the main FIDs.

Next question comes from Martijn Rats from Morgan Stanley.

Most of my questions have already been answered, but there's one thing I still just wanted to clarify. In the statement, it says that you're confirming growth and profitability targets for 2013, and of course, there is the targeted production will be higher this year than last year. But always, when I think about Eni's profitability targets, they're, as far as I know, all sort of a few years out like 2015, '16, '17 and towards the end of the decade. What, exactly, what profitability targets for 2013 are you reconfirming?

The line was not very good. So the first question is about production this year compared to last year's, is that correct?

No. Look, I can repeat the question. There is only one. In the statement it says that you're confirming targets for growth and profitability for 2013. But as far as I'm aware, most of Eni's targets are all a few years out. I was wondering if you could just quickly summarize which are actually the targets for 2013 that you are confirming besides the obvious one that production will be higher than last year. Marco Alverà: Martjin, it's Marco speaking. If you're talking about the statement, you may be referring to the Gas & Power EBIT guidance that we are reconfirming as the same we gave when we announced the 2012 results a few months back, which was of an EBIT in line with underlying profitability that we had last year in Gas & Power. I'm not sure though this was the question.

Okay. So that's the full extent of that comment? Marco Alverà: Yes.

Next question comes from Ms. Irene Himona from [indiscernible].

Irene Himona from SocGen. I had a couple of questions, please. So first of all, on Refining & Marketing. I wonder if you can give us the sense of the performance of Refining versus Marketing, because I note that although the refining margin was up quite strongly, your retail sales are down quite substantially in both Italy and overseas. So there's clearly demand destruction continuing in that market. So just a sense of one versus the other. My second question on the Gas & Power EBIT guidance. I mean, are you prepared to say, for 2013, given that the contract have not as yet been renegotiated, given that we've seen the level of the loss in Q1, are you prepared to say what you would expect in the full year if the contracts are not actually fully renegotiated by year end?

Okay, Irene, as far as the R&M, the EBIT we achieved in the first quarter 2013, that is around 115 negative has been driven by the refining. So the negative is made by refinery and the retail and wholesale are more or less breakeven. Marco Alverà: Irene, on Gas & Power, I think what we're prepared to say is having confirmed the guidance, which means that we're committing to an equal result as we had in 2012, excluding the one-offs. The renegotiations are all underway. It would be early to speculate on which exactly and on what terms we expect to close. What I can say is that there's quite good traction on these discussions. As you know, all the discussions are open at this point. Based on the individual closing of these negotiations, we will have volatility in quarterly performance as the effects are all retroactive to basically January 2013 or, in some cases, even October 2012. So I think that's what we're prepared to say at the moment. Of course, the PSV is deteriorating, has deteriorated, now, the liquid hub price in Italy is, in fact, below Northern hubs. And as we said previously, this is putting pressure on the commercial margins but it's also somewhat making the discussion with suppliers a little easier.

Next question comes from Mr. Nitin Sharma from JPMorgan. Nitin Sharma - JP Morgan Chase & Co, Research Division: Two questions, if I may. First one on the ongoing negotiations for gas supply contracts. Could you give us some more details on the direction of these discussions? Specifically, will it be correct to assume post-completion soon of the present round of renegotiations pricing of about 70% to 80% of your gas supply will be hub-linked? And second one, Claudio, could you please give us some more details on the next step in Area 4? Obviously, you've announced the completion of appraisal plan today. Specifically, what sort of time line do you have for drilling of the exploration prospect in the Southern part of the block? Marco Alverà: I think it's fair as you pointed out to assume there will be more than one round. As you may know, these contracts tend to be looking backward. So the reference periods that we're looking at right now don't necessarily reflect the commercial outlook we have for 20 -- for the full year and even, worse, for 2014. So there will be multiple rounds of negotiation. I would stick to the targets we gave to have, over the medium-term, actually 100% of our supply costs linked to hub levels, which does not mean they will be hub-indexed but at the level basis, I think that's a fair assumption to make, yes.

So for Mozambique, Mamba, I know that we are -- so far, we have completed successful drilling of 9 wells, out of which, 6 have been tested. So the exploration phase and the appraisal phase in Mamba has been completed. Now we are already started on the study to arrive as soon as possible to the plan of development especially for the strata area, but also for the other area completely entirely in the Area 4. We have still one well, but we start drilling back to back and we think we are going to finish by August, September, in the South part of the block, targeting different kind of horizons. And that will be, I think, that we're going to drill these wells and then we, for a while, we stop the exploration campaign. We have to reassess all the data for the followings [ph]. So that is what is happening in the Area 4 exploration.

Next question comes from Mr. Hootan Yazhari from Merrill Lynch.

Just a quick question. You addressed a little bit earlier that you're obviously not prepared to comment on the timings of the disposal of your residual stakes in Galp and Snam. Nevertheless, I just wanted to get an indication of how urgent you see these in light of the buyback targets that you put out at the Strategy Day recently. Are you thinking, is the buyback moving up in importance in management's view? Or is it something you're going to wait until 2014, when we see the reversal of the working capital build-ups that you alluded to?

If you remember, what we said in terms of buyback, was something different. We never linked the buyback with the disposal. We said that the buyback will be -- the decision about the buyback, [indiscernible] assume, I would say, after summer will be based on the Brent price we will experience at time. And the second, the degree of completion on our strategy, as far as 2013, 2014 is concerned. I mean the increase in E&P production and the status of the gas supply contract renegotiations. So we never link the buyback with the disposal of Galp and Snam. We are not in a hurry. We are just waiting the way, the timing, the better timing to realize the disposal in order to maximize the value.

Next question comes from Mr. Jon Rigby from UBS.

Could we just go back to Gas & Power a minute? Are you able to give a little more color on the way that earnings fall or are split between commercial and domestic within Italy, so we get some idea of the damage that the PSV linkage in commercial is doing to earnings? And maybe also if you're trying to be relatively smart about what you do with your gas, i.e. selling it out of Italy, how earnings are moving between Italian earnings in the segment and non-Italian earnings in the segment? Marco Alverà: I would assume that the numbers right now reflect the regulated price, which is an official price, where the PSV does not have an impact as that is mainly oil-linked although that will increase over time, as stated by the regulator. That is for what regards the residential regulated tariffs. Regarding Italian versus Europe, I think as, let's say, the hubs converge even though right now the PSV has been below the Northern hubs convergence, also the prices will converge. So from a commercial perspective, the margins you can expect are similar or are beginning to be similar. This is for the, let's say, the current sales we're making. Although in the portfolio, it's fair to say, we also have historical sales that are oil-linked. This is before the PSV really became a reference point in the liquid market only last year, this was probably the case. We are working to position ourselves in the premium segments, increasing the retail number of customers and you saw there's a firm commitment on that. We're also increasing LNG sales and we're also targeting more sophisticated products through the integration of our commercial operations that are trading operations. We're now able to offer the flexibility that the customers are asking and they're beginning to -- they're willing to pay a premium for this.

Right. And could I maybe just ask a follow-up and ask in a different way. Are your supply contracts that are originally targeted for Italy, where you have some flexibility about where you sell, were they profitable into commercial users in Northern Europe? Marco Alverà: I would say yes, although you have to keep -- there are transport costs associated with those contracts that you won't recover once that gas that was destined for Italy is sold outside of Italy. The other consideration I would make is that this is only applicable for the Norwegian and for the Dutch contracts. The other contracts that are physically delivered in Italy, because there's no reverse flow capacity out of Italy, cannot be physically moved outside of Italy.

Great. Are there any more questions from the conference call?

No more question at the moment.

Then I think we can wrap everything up. We're available for further questions on the Investor Relations number if you want. Thank you.

Ladies and gentlemen, the conference is over. Thank you for your participation.