Eni S.p.A. (E) Q1 2022 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to Eni's 2022 First Quarter Results Conference Call hosted by Mr. Francesco Gattei, Chief Financial Officer. [Operator Instructions] I am now handing you over to your host to begin today's conference. Thank you.

Good afternoon. Welcome to Eni 2022 first quarter conference call. On the back of recovering demand, the energy market began 2022 with a tightening upstream as supply is impacted by a number of years of low investment, yielding sustained inventory draws, and the loss per production capacity both in oil and gas. Correspondingly, downstream has been impacted by the effect of rising raw material prices and cost of its energy, albeit, refining saw a rapid recovery margins in March. The impact of the Russia and Ukraine conflict has been to hasten these prevailing dynamics further, adding a further strain to an already tight market. The direct effect of the war on energy markets and its wider implication for the global economy means condition have also been and continue to be highly volatile, and the outlook is uncertain. In the context of the complexity of the current market, Eni was able to boast significant progress, its strategy and achieved excellent financial results during the quarter. The first quarter was a particularly active period in Eni's strategic transformation. We have progressed our distinctive approach of unlocking asset growth potential and crystallizing value through new business models, despite the context of volatility and uncertainty, we are successfully delivered two IPOs. Since we listed VAR in mid-February, its price increased by almost 45%. In addition, in early March, we efficiently listed NEOA, the first and biggest energy transition-oriented SPAC on the London Stock Exchange. Furthermore, we are just waiting for final authorization to make effective the business combination in Angola with BP, which we hope to obtain during the third quarter. Height [ph] of the IPO Plenitude that is planned for 2022 subject to market condition. We have also announced that at our strategy of the incorporation of biorefining and marketing businesses into a sustainable mobility company. And this project is now moving forward. We have also strengthened our partnership in Novamont, the world's leading biochemical company, growing our stake from 25% to 35%. Finally, we completed the sale of 49% of our gas fired power plants to Sixth Street. Notably in the context of 2022, thanks to our strategic alliances ecosystem, we have been contributing to establishing alternative gas supply opportunities for Europe. We have also been widening this approach [indiscernible], for instance, signing agreement with Mozambique and Benin to jointly develop agro [indiscernible] to supply feedstock to our biorefineries, while positively benefiting local economies. By flattening the continued successful execution of our strategic path, in March, we accelerate the pace of 2015 at zero by further improving our emission reduction target, and the Board has recently authorized up to €3 billion of new sustainable senior bond issuance. Finally, we reconfirm the commitment to shareholder value and returns by announcing the 2022 distribution policy with increased dividend and share buyback, offering a very attractive 9% combined yield based on current share prices. The strength of Eni's asset portfolio backed the strategic progress in the quarter with another solid set of results, both from the operational and financial point of view. In E&P production, came in line with guidance despite some unforeseen downtime in Libya, and the export via CPC from Kazakhstan. During the quarter, we started up the Ndungu field, the third startup in Angola Block 15/06 in just 7 months, and with the startup of the FPSO in Mexico, we initiated the first crude oil export project by a foreign company in the country, confirming once again our ability to deliver fast time to market. Exploration activity continues to be asset lead, which maximize value and contributes to the short time to market. In the first 3 months, we discovered over 170 million barrels of oil equivalent, mainly in Angola, Algeria, Egypt, and the Emirates, putting us on track to meet our planned guidance. It was also a robust quarter for GGP. LNG operation and our flexible portfolio allowed us to manage the volatility of the markets and continue to supply our customers. In Plenitude, we continue to plant our integrated business model. In just one year, we increased by 4x our installed renewable capacity and increased our power generation to serve more than 10 million customers. In the downstream, while the high cost of feedstock and utilities impacted by around €400 million versus last year, we were able to record a significant improvement in R&M, which achieved positive results. Chemicals, on the other side remained negatively impacted by a challenging scenario. These results confirm the quality of our business. Adjusted EBIT of €5.2 billion is 4x higher than last year, resulting in an adjusted net profit of €3.3 billion. Our cash flow from operation of €5.6 billion against CapEx or €1.6 billion, yields to an organic free cash flow of €4 billion that covers almost entirely our annual distribution policy. And despite funding high working capital requirements this quarter, we have also progressed on the net debt side with leverage falling to 0.18. Let's now move to natural resources in more detail. Upstream EBIT in the first quarter 2022 was €4.4 billion, driven by our focus on high value activities and flat cost management and capturing the prevailing market scenario. On production, we confirm 2022 at around 1.7 million barrels of oil equivalent per day, with a contribution from new startup such as Area 1 fulfill offshore Mexico, [indiscernible] in Angola and Coral floating LNG in Mozambique, plus the ramp up of Berkine in Algeria, more than offsetting production decline and lower entitlement due to the VAR IPO. We expect the second quarter production in the range of 1.61 million, 1.6 2 million barrels per day, mainly impacted by seasonal maintenance before the ramp up of new production in the second half of the year. GGP recorded €0.9 billion of adjusted EBIT. International LNG activities contributed 40% to results. The recovering gas demand led to an increase of 9% in volume sold in Italy, and 4% in Europe. Careful optimization of our supply portfolio helping us to manage price volatility. Considering the performance already achieved, and the expected evolution of the market and assuming not significant disruption on gas supply from Russia, we expect an annual adjusted EBIT of €1.2 billion, a 30% increase to our original guidance. The current crisis has prompt a renewed effort to strength energy security. We are actively pursuing alternative and additional supply opportunities for Europe, and specifically Italy, leveraging our global upstream portfolio and a strategic partnership with producing countries. In the short-term, 2022, 2023, we were relying on pipeline additional volume from Algeria and Libya. We also expect to import additional LNG from Egypt, thanks to rising the metal utilization rate, Nigeria, Qatar and potentially Angola within existing regasification capacity available in Italy. In the medium term, we expect both gas imports via pipeline for North Africa to contribute with additional volumes. This mainly takes into account the recently signed agreement with Sonatrach. Other LNG sources from our portfolio may also be activated. These include Congo, where we have recently signed an MOU which provides for the acceleration of certain upstream development with the corresponding increase of LNG production. In Congo, we are employing a modular and accelerated development approach. This is consistent with our fast time to market, capitalize strategy and well suited to current conditions. And now let's move on to energy evolution. We confirm that we are on track with Plenitude IPO progress, having filed the registration document with Italia Market Authority. And we expect it to float Plenitude in 2022, subject to market conditions. Prior to distinctive business model proved the resilient even in the current market condition, where high power and gas prices and volatility generated from an hedge volume exposure and softer performance in retail. This was partially compensated by higher renewable profitability. We are therefore able to reconfirm full year EBITDA guidance off over €0.6 billion. In the quarter, R&M experienced some sequential improvement, mainly benefiting from a remarkable rebound of the refining margin during March, reflecting a tight market for a final product, specially diesel. We have continued to focus on optimizing our activity and mitigate the high cost of energy. As a result, we were able to report a positive EBIT of €70 million compared to about €200 million loss in the first quarter 2021. On chemicals, Versalis suffered a weak quarter due to a strong increase in oil-based feedstock cost and utilities expenses. Downstream pro forma EBIT 2022 is now expected positive, previously negative driven by the improved outlook or refining macro and action of asset optimization and the efficiency initiatives. Finally, our cash balance was further enhanced notwithstanding the seasonal and price links absorption of working capital that impacted by €2 billion. The underlying cash flow from operation before working capital was €5.6 billion more than 3x CapEx, resulting in organic free cash flow of around €4 billion. For the year, we are revising our power guidance for CFFO to €16 billion at $90 per barrel, around €1 billion more than our previous estimate. CapEx in the quarter was €1.6 billion and full year is expected at €8 billion, confirming the original guidance at the same exchange rate. Capital discipline through cycle is a critical component of our strategy. For this year, we expect a competitive cash neutrality for CapEx and floor dividend of around $46 per barrel in line with the plan average of $45. Even with the working capital building and after portfolio activity in this quarter, we have also reduced our net debt which now stands at 18% leverage. Low gearing confirm financial resilience and offer strategic flexibility. Eni will update its 2022 buyback scenario assessment in July for establishing the upside to the €1.1 billion buyback. The extra buyback will be equivalent to 30% of the incremental free cash flow in the event that the oil price exceed $90 per barrel on a yearly basis. That concludes my prepared remarks. I, along with ENI top management now welcome your questions.

[Operator Instructions] The first question comes from Michele Della Vigna of Goldman Sachs.

Thank you so much for the presentation. I had two questions. The first one really is around your fast track and do an exploration strategy, which clearly ideally suits Europe's need for security supply at the moment. And we've seen the announcement Algeria, Egypt, Congo, Angola, et cetera. I was wondering if you add up all of these incremental opportunities together, what extra volumes, can you get within the next 1 to 3 years? And then staying on fast tracking, you are going to do one of the first fast tracking of floating LNG in Congo. I was wondering from that, how much could be transferred potentially to Mozambique, where you will start up your development later in the year, but the whole onshore project has been indefinitely delayed because of security concerns. Could this become the new way in which the gas resources can be developed with a higher return and quicker time to market? Thank you.

Thank you, Michela. Very fast reply on the second question, then I will leave it for more description to [indiscernible] for the other question. On floating LNG, the concept, as you well understood is a concept that is trying to create a completely new approach, a new model for LNG that will help substantially to reduce the cycle of LNG project with less size, less capital upfront, shorter time to market short contract obligations. So, making the LNG model more similar to an oil [indiscernible] more or less, say, market based, let's say committing in terms of long-term delivery. So, this is a concept that we are, let's say applying to Congo, but clearly, as a lot of opportunity of uses currently you have identified Mozambique as an alternative to security. So -- but there will be other opportunity that could emerge. Now I leave it to Guido for more detail on the question.

Okay, thank you. Thank you, Francesco. And thank you for the question. So clearly in our plan we have already projects and activity to deliver more than 450,000 barrels of gas in 2025. And given this current scenario, we've been able to unlock project to deliver and to mobilize 14 TCF of additional gas resources in Congo, in Egypt, in Algeria [indiscernible]. Sorry, a problem with the microphone. So, can you hear me now? This project are in Congo, in -- but also given our infrastructure lead exploration, we have also opportunity in Egypt, in Algeria. This may add to our production profile in 2025 about 50,000 barrels. And in terms of equity CapEx in a 4-year plan, thanks to the configuration of our project. We expected less than 5% increase, which is well within our flexibility of our CapEx upstream -- overall CapEx upstream. Going to Mozambique, as you know, the operator is -- while monitoring, the security situation is still looking to opportunities to optimize the concept leveraging on synergies with the Area -- with the Area 1. On the other hand, we are looking at opportunities to implement development of short Fastrack modular like in Congo and we will come back on those, and we are already engaging partners and other stakeholders. Thank you.

Thank you.

The next question is from Irene Himona of Societe Generale. Please go ahead.

Thank you. Good afternoon, and congratulations on a strong quarter. I had two questions, please. Firstly, your Q1 interest expense €339 million is materially higher than in the previous two quarters. This is despite your declining leverage. So, I wonder if you can help us understand this, very sharp increase? And secondly, an update on Kazakhstan, please. What is your current production level? And is there a disruption to flows particularly through the Russian pipeline given the weather damage reported recently? Thank you.

Yes, I reply to the first related to the interest. The increase that you see is mainly related to the change in interest rates, that is clearly impacting the yields. And the other effect is related to foreign exchange FX. So, that are the two main drivers for the increase that you see. Then there are some, let's say one-off effects that are less relevant. About the Kazakhstan production, I leave back the floor to Guido.

Now our production in Kazakhstan is above 160,000 barrels of oil equivalent per day. We -- indeed we had some disruption on the export line CPC. It happened in mid of April, but now in the last couple of days, this has been recovered and we are back in full production.

Thank you very much.

The next question is from Massimo Bonisoli of Equita. Please go ahead.

Good afternoon. Three very quick question. One on the [indiscernible] refining margin, if you can provide an indication for the average in April. The second on the networking capital. If you can provide resource some guidance on the remaining effect over the rest of the year? And the third on the -- on Novamont and the strategy of Novamont following the increase in the stake of the company, if you are considering any strategic decision there or even IPO?

Yes, thank you, Massimo. About [indiscernible] clearly, we are seeing completely different trend versus the last in the past month. Particularly really [indiscernible] was negative practically for the entire 2020, 2021 from April -- from March and through from the middle of March, we saw a progressively increasing in the [indiscernible] in the last -- in this quarter. So, starting from April, the average is around 14 -- more than $14 per barrel. The car rented last figures are between $18 to $20 per barrel. So, the [indiscernible] clearly is materially impacted by the diesel spread that you see in the market. In terms of working capital, you have seen that there is an increase on absorb of working capital in the first quarter. This is normal. It's a seasonal trend that you see in all -- clearly all first quarter of the year, that is amplified by the price scenario that we are seeing, so the trade receivable amount. This is clearly reverted during the year. We have an additional element that will impact the working capital during the year that is [indiscernible] impact if you remember last year at the end -- in the last quarter, there was a positive results from cascade of the remaining particularly of power, this will return is almost €1 billion in the -- during the -- during this year, but we have a clearly plan that with this well in advance. So, you will see in the coming quarter a return or reduction of this working capital effect, but the -- around we are expecting something range of €2 billion of negative impact of the working capital because of this effect of [indiscernible] that I referred to before. About Novamont, I will like the -- now the question to the [indiscernible] Fannie clearly our move from 25% to 35%. There is an opportunity to reinforce the partnership. I will leave in the -- some additional color on this new.

Sure. Thanks for the question. So this agreement start with intention to make a strong field in the plastic sector combining a traditional portfolio that Versalis has today based of course on polygynous during the market and technology and also with the technology that Novamont has in terms of a bioplastics that they've developed over the last 20 plus years in terms of green chemistry. The two company now that have a different governance and also a different participation in terms of Versalis and Novamont have been discussing in order to strength partnership and enhance the value creation by enjoying in the market and of course this lever open for any possible solution in the future

Very clear. Thank you very much.

The next question is from Biraj Borkhataria of RBC. Please go ahead.

Hi, there. Thanks for taking my question. The first ones on the very strong gas trading results in Q1. Obviously, you raised the guidance for 2022. I was wondering if you could give a little bit of color on '23 given the expectation, obviously, in your slide shows all the incremental volumes that will come through into that organization going forward? And the second question is on the low carbon side. What we've seen from Eni and in terms of policy is an acceleration of various parts of energy. And it looks like there'll be more opportunities in low carbon than previously anticipated, as particularly in Europe, the content looks to accelerate the transition. So, should we expect Eni looking to accelerate in low carbon as well as on the kind of short cycle gas front, given such strong free cash flow and a management debt profile at this point? Thank you.

Okay. I leave now to Cristian Signoretto for the first question, then I will come back for the second.

Hello. So, thanks for your question. On the LNG trading business, let's say this quarter has been clearly sustained for two reasons. On the one hand, we had an increase of LNG availability vis-à-vis last year. And clearly also the price environment was actually very prone for optimization and let's say value capturing. If I have to project this into the future, I will tell you that clearly, we have a trajectory of increasing LNG portfolio in the coming year. So clearly this will provide further opportunities for increasing the volume available for CS and for optimization. And on the other hand, I mean, we think we believe that the LNG and gas market is going to stay tight for quite a while given the current situation and the current geopolitical stress. So, I would expect also that clearly a tightening scenario will clearly benefit also that line of business.

About the opportunity that clearly are growing in terms of transition and low carbon opportunity, you've seen that we have presented the last Capital Markets Day an improved and quite, let's say, aggressive pace towards decarbonizing our activities. We have also added to this trajectory to this plan also the tools that we are implementing. These tools are made of business model, business opportunity, new financial solutions are referring clearly not only to planning to do, but to the new, let's say sustainable mobility company. The SPAC, that is another element that we are adding to capture technology and opportunity to improve and to add additional option to this evolution. In this quarter, for example, we have invested in the CFS, and so in the nuclear fusion, maintaining our leadership position in that venture. And as we were referring before, on Novamont, we are increasing our exposure to biochemicals. So, Eni is already well committed and we will continue to exploit in the most, let's say, diversified way, all the different segments and businesses that are emerging, including for example, so the CCS, that is an additional, let's say business line that where Eni is on the front page. So, I think that -- I agree with you there will be in the -- in this market scenario, emerging opportunity and we will have also the capability to speed up in many of these different fronts.

Okay, thank you.

The next question is from Oswald Clint of Bernstein. Please go ahead.

Yes. Thank you everyone. Just back on the global gas and global gas business, if we could just focus on the pipeline part of the business and the trading around that piece into Europe, into Italy, could you just tell us a little bit more about what you're up to in the quarter in terms of logistics and optimize time spreads, please. And I mean, I'm really trying to get was this a kind of old-time best performance from the team there and as you said the market is going to stay tighter, bringing some more gas into the portfolio. So, could we think about this level of performance being sustained here? And then secondly, you talked about the refining margin as well. But there is energy utility cost headwinds against that. So, I know you're taking some steps to alleviate that, but could you flesh those out a little bit, please? Just tell us what exactly you're doing to alleviate those pressures? And could we see some of those taking effect through the rest of 2022, please. Thank you.

Thank you, Oswald. I will leave the second question to Giuseppe Pino Ricci that is connected by phone and then come back to Cristian.

So, thanks for the question. So, on the -- sorry.

Pino, if you could answer about the …

Okay. I start immediately, Francesco. About the refining margin, of course, these are affected for the utilities cost. But in our system in the starting from the fourth quarter of last year, we implemented a lot of initiatives to reduce the metal consumption in the refineries replacing the metal consumption with other fuels like LPG and other [indiscernible]. And recently we also put in service a plant gasification of BTU [ph] to produce [indiscernible] gas, that replace methane in our power station. And also, we modify all the configuration of the plant in order to minimize the use of steam reformer for hydrogen production that are a very high consumer of methane. In this way, we are able to reduce the metal consumption by 70%. And saw two-thirds of the extra cost of utilities are neutralized. These means that our margin gain of these effect, and in the last month, March, we recover all the losses, because of the low margin of January, February. And in April, we are in a much better condition.

Okay. Now leave back to Cristian.

Yes. So, on the gas result for this quarter. First of all, clearly, the market has been very volatile. And clearly with the flexibilities and optionalities in our contracts, we took advantage of surely the time spread. So, we anticipated many of the flexibility that we had in our contracts this quarter, because of the wild, let's say price movements, and -- but also on the geographical spread, you probably have seen that there are spreads between the markets in Europe which are unseen, because of the situation of the market. So clearly this is basically explain at least 30% of the exceptional result of the activity in the first quarter. So then going ahead, well, on the one hand, as I explained, so some of the flexibilities we have already optimized, so we have less to being able to monetize in the following months. And as you know, I mean, our business is a bit cyclical in the sense that there are courses in which we can be -- we can outbid the market, but also then quarters in which we are borrowing a bit in order to make that extra performance. And so, let's say I clearly the volatility of the quarter is such that we project a €1.2 billion results by the end of the year, which means that there will be some quarters in which we're going to be weak, when then let's say probably the last quarter, which is a winter quarter, we will be able to achieve that target. On the other hand, clearly while the -- again, wild market movements and opportunities will be there to be captured if there are opportunities. One thing I want to stress is that clearly this target is assuming as Francesco was saying steady flow and no disruption from Russia.

Thank you. Thank you all.

The next question is from Henri Patricot of UBS. Please go ahead.

Yes, thank you for the update. Two questions, please. The first one just on your gas business and the gas supply coming from Russia. Can you give us an update on where you are in terms of the new payment mechanism? What are your expectations here? And what would be the impact for Eni if there was an interruption of gas supply to Italy for one reason or another? And second one, just a quick follow-up on refining. Just to get a sense of the market capture in the second quarter. [Indiscernible] to see higher utilization from having a 70% in the first quarter or do you have some more maintenance with the rest of the year? Thank you.

Okay. I will reply to the first and then come back to Pino. About the mechanism of payment, what we can say that we are clearly continuing to analyze the situation and we are in strict coordination with the authorities with the European and the Italian government. That clearly what we are going to pay, we will pay the gas delivered in compliance with the contract terms and following the international sanctions. So, we will respect to clearly all these rules. The currency of the contract is euro and we continue to receive invoices in accrued in euro and we have not opened it [indiscernible] account. That is what we can say now. I leave now to Pino for the utilization rate and refining performance.

Thanks, Francesco. In the third quarter, our utilization rate was about 70%. But just in the -- in March, we started to increase the capacity of the plant in all the refining system. And in second quarter we expected to have the maximum utilization massive [technical difficulty] utilization gain in the moment [technical difficulty]. We have moved [technical difficulty] shutdown in [technical difficulty] in the next difficult part of the year in order to avoid any shutdown [technical difficulty]. And this the same in Italy, Europe and [indiscernible].

Okay. Thank you.

The next question is from Alessandro Pozzi of Mediobanca. Please go ahead.

Hi, there. I have a few questions. The first one was back to [indiscernible], it's been very low this quarter. Clearly, the impact of higher oil prices had a positive -- is a positive factor. I was wondering if you can give us a bit more color on the moving parts and what should we assume for the rest of the year? And also, maybe if you can quantify the impact of Libya. I believe that when you have really high spot prices in Italy that helps also lowering the tax rate. And the second one is on exploration or what's been your [indiscernible]. I was wondering what are the next maybe one or two key high impact [indiscernible] that you're planning to do over next few quarters. And lastly, I think if I look at the planning to the retail gas sales, including managed to make a big improvement in the power sales and MO [ph] clients. But in terms of retail gas sales, I think it's down 3% year-on-year. I was wondering whether they're just purely the impact of demand [indiscernible] given the higher prices.

Thank you, Alessandro. Now I leave it to Luca-Bertelli for the answer related to the exploration, then to Stefano Goberti for Plenitude, and then I will come back for the tax rate.

Okay, for what concern [indiscernible] wells that we are going to drill in the remaining part of the year, we will have flatter activity in Egypt, flatter activity in Angola. We will have a -- while in offshore Mozambique. And finally, also we will become back drilling on Ballet [ph] in discovery. We already start to drill [indiscernible] development well this year. And finally, also other wells in Angola new field [indiscernible]

Which one do you think is the most important one of those?

The most important one -- I don’t know to say what's -- I don’t know what's the most important one. So, our work is a lot of risk associated. So, I'd say that all together is a good package of wells that would provide the results that we expect for.

Got it. Fair enough. Thank you.

Stefano, please.

Okay. Thank you, Alessandro. On Plenitude itself the result was a little bit softer this quarter compared to last quarter because of the volume effect, mainly linked to the fact that we -- to our retail client we sell at fixed prices. And when we become that -- at the end of the period that we are shorter we need to rebuy the commodity in order to serve their consumption in the first quarter. There were -- there was particularly against that because it was colder than the forecast. So, this is the effect on the economic result. In terms of volume, we in Plenitude, we did not record a specific trend in reduction of consume, but by maybe the other way because of the weather condition. Maybe you are referring to the overall portfolio, naïve portfolio [indiscernible] in your question.

Okay. Yes.

In terms of tax rate, that clearly we have already guided in the past with a 50% rate -- tax rate in $70, $80 order. Now, clearly, we are above that. The composition of that results has clearly impacted the tax rate. As soon as the price of oil and gas is growing, you have benefited by the positive contribution of countries with lower tax rates in the [indiscernible] IMP businesses. Also, the benefit to the contributor of GGP is helping to reduce the tax rate and also the results of affiliate. So as a sort of guidance, rule of thumb for the year in the current price environment, around $100 per barrel -- $95, $100 per barrel. I will confirm something in the range of 40%. The comments related to Libyan gas, I would say more than that is the benefit of upstream results in even -- clearly in Italy in the current price environment is helping to have a contributor, a positive contributor also from that business. And this clearly is another of the factors that reduced the tax rate.

Okay. Thank you very much. Maybe just a follow-up on the payment mechanism to Russia. When is the deadline for the next payment for the April gas deliveries?

You know that you pay within the following month. So the April deliveries paid during May.

Sometime in May. Okay. Thank you.

The last question is from Bertrand Hodee of Kepler Cheuvreux. Please go ahead.

Yes. Hello, everyone. I have one question left. Francesco, can you quantify the risk in terms of financial terms? If Gazprom gas supply were to stop for any reason, have you already committed to sell some of these gas to serve parties on a forward-basis. And in short, will you be able to call for force majeure and under what condition? And is there a risk of mismatch between your alternative source of supply and your already committed selling gas price?

It is a complicated question. I think that there are a lot of different options, alternatives and flexibility in our portfolio. We were referring before to the new roads or additional volumes that we added during the past month. Clearly there is also LNG that could be, let's say, [indiscernible] through the market opportunity. And therefore, clearly it is too difficult now to give you an answer because there will be many components that have to be matched. In general speaking, if there is an there are special resting condition, there are contractual protection and general legal coverage that could be called in terms of force majeure. So, in that case, fostering [ph] condition, you could have also that level of protection. So, I will say that there are different tools that could be activated in different scenarios.

Thank you. Can I ask just a follow-up? Are you still selling, let's say, longer than 1 month ahead your expected supply from Gazprom or if you completely stop selling on a forward basis volumes that could eventually disappear?

I think this is a commercial sensitive information that I prefer not to disclose.

Fair enough. Thank you.

Gentlemen, we have another question that has joined from Alastair Syme of Citi. Please go ahead.

Thanks, Francesco. Can I just ask on the accounting treatment that you've put into Saipem, just a little bit unclear of what's gone through this quarter or what's still to come for the remainder of the year in terms of the recapitalization?

We consider the contribution to Saipem that we have, let's say, provided financial support in terms of future increase of capital you will see in our portfolio M&A activity. So, it is practically the share of Eni, the contribution of Eni of the €1.5 billion. That was the first step -- is already included in that amount of portfolio, net portfolio activity.

But are you -- is there something for the future underwriting that has to go on the balance sheet as well?

We have already included the provision for the additional increase of capital.

Right. Okay. Thanks very much.

Gentlemen, there are no more questions at this time. Would you like to make any closing remarks?

Thank you. Thank you to all for the question. I think that the quarter was confirming the strategic path and the effective of our execution. And clearly, we will thank you and we remain in contact. For any additional question, there is our Investor Relations team with John -- Jonathan Rigby that you know very well as a -- as new add for answering all your questions. Thank you very much.