ENI Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 27, 2023

There are 18 speakers on the call.

Operator

And welcome to ENI's 2023 Third Quarter Results Conference Call, hosted by Mr. Francesco Gatai, Chief Financial Officer. For the duration of the call, you will be in listen only mode. However, at the end of the call, you'll have an opportunity to ask questions by pressing I am now handing you over to your host to begin today's conference. Thank you.

Speaker 1

Good afternoon, and welcome to YNI's 3rd quarter 9 month 2023 results conference call. Energy markets remain volatile, but at T and I, our focus is on delivering results In all scenarios, while at the same time advancing our longer term strategy. Cutri As seen us successfully achieving both these things. Before digging deeper into the numbers, let me emphasize The key strategic accomplishment for the quarter. We are evolving and strengthening core business such as E and P and GGP For the challenge of transitioning energy markets and taking opportunity to build new relevant businesses such as Plenitude and eLive, biochemical and CCUS.

Speaker 1

In Upstream, in August, we began production of Belen offshore Ivory Coast less than 2 years after discovery, Further evidence of the efficient integration of world class exploration with a development strategy focusing on time to market and value maximization. Production from Belen is a contributor to this quarter year on year growth, and its phases ramp up is an important element in the 3%, 4% growth In our current full year plan. This approach continues to deliver. We are therefore delighted to significantly exceed our full year target Of 700,000,000 BOE of Discovery Resources. The recently announced the Gangnord Discovery Offshore Indonesia He's assessed by 3rd party provider as the largest in the industry in 2023.

Speaker 1

Indeed, along with Nargis announced earlier this year, ENI currently has 2 of the top 5. I will revisit GANG in more detail later. Meanwhile, we are also upgrading our upstream portfolio. In September, we announced the sale of our Nigerian onshore production company, NAOK, Following the divestment of mature Congo's assets earlier this year. At the same time, we have been advancing our agreed purchase of Neptune, a portfolio That represents an exceptional feat for us.

Speaker 1

Closing of Neptune remains on track for Q1 2024. Geng and Netung will be important contributor to the shifting balance of our upstream portfolio towards gas. Obtaining full value of our equity production is, of course, critical. And so we were pleased in the past few days to announce new LNG supply agreement With Congo, Qatar and Indonesia, we have seen really positive progress as we work to establish a leading CCUS position. Our Bakken U.

Speaker 1

A. Project was awarded a CO2 appraisal and storage license by the U. K. Government, while we also agreed a term with the U. K.

Speaker 1

For the world's 1st asset based regulated CCS business model for our operated INET project. In Energy Evolution, we are also very active. Our team met with many of you in September to update on our unique biorefining Agriab strategy. We were also pleased to confirm an agreement to explore the development operation of Anubia biorefinery in South Korea, Supporting the strong global growth target in that business. Moreover, this month, we have closed the purchase of NovoMont, advancing Versailles progress He's specializing his portfolio towards the growing market of biochemical and bioplastics.

Speaker 1

And now to group results. Strong segmental EBIT from each of our main businesses' results in over $3,000,000,000 group EBIT for the quarter, driven by E and P and $11,000,000,000 over the 9 months. Including associate, the pro form a EBIT of the company in the quarter was €4,000,000,000 14,000,000,000 over the 9 months, With the tax rate in the mid 40% consistently with the oil price business performance and as you say contribution, Net income for the quarter was €1,800,000,000 resulting in a 9 month net income of 6.6 We continue to have an excellent cash conversion. Underlying 3 quarters cash flow from operation of €3,400,000,000 12,900,000,000 For the 9 months, stand out at the top of our historical performance with an organic free cash flow to date of around 6,200,000,000 Which more than covers our 2023 distribution. We accelerate the share buyback this quarter, repurchasing EUR 600,000,000 meaning We have repurchased over 2% of our share in the year to end September, and our buyback will continue at accelerated pace In the Q4, sharing issues are down almost 6% year on year.

Speaker 1

September also saw the first payment of the 0.94 SENS quarterly dividend. As anticipated, CapEx of $1,900,000,000 this quarter reflects lower spend than the first half. We have also made the 2nd payment in respect of the PBF joint venture in this quarter. And even as we invest organically And into portfolio and buyback shares, the balance sheet remains in exceptionally good shape with leverage borrowed change from the 2nd quarter at 15% And only up modestly over the last year. Let's now take a look at the business segment performance quarter.

Speaker 1

Taking Natural reserves first. Upstream production averaged 1,635,000 barrels per day, up 4% year on year With the startup of Balena, as I noted, but also higher production in Algeria, ramp ups in Mexico and Mozambique, recovering Kazakhstan after last year and planned outages. Higher production in higher oil prices helped push EBIT to €2,600,000,000 up 26% Quarter on quarter and with our upstream satellites where we generated EUR 3,400,000,000 of adjusted EBIT. GGP had a softer quarter, as we said it would. The second half of the year is benefiting from less available portfolio flexibility And Coutri saw fewer optimization opportunity as spreads narrowed.

Speaker 1

As promised, I want to focus further on our recently announced Ganga North discovery in the Kutay Basin Offshore Indonesia. It is worth refreshing on the main characteristic of our exploration strategy because Gangne North is such a good example. We are focused on gas. We seek a larger equity share that allows us to have greater control of the project and the option of Early valorization through our dual exploration strategy. We explore close to existing infrastructure, which benefits time to market and reduce the development cost And enhancing value, our distinctive partner in house development process help us optimize time to market.

Speaker 1

And as a result, Not only NII is consistently the leading global explorer in multiple basins among our peers, but also deliver the best Full cycle returns. In term of Geng specifically, it is a very significant discovery with 5 Tcf Of gas and 400,000,000 barrels of condensate in place, equivalent to around a recoverable volume of 800,000,000 barrels of oil equivalent. It's an industry larger discovery year to date. Well productivity confirmed by the DST is excellent. After completing the Neptune purchase, Eni will have an 88% participation.

Speaker 1

Development of a Field of this scale will require some new infrastructure, including a floating production unit. But this can now be optimized as A new app development and include reserves for an additional 5 TCF on our recently acquired IDD acreage. Furthermore, the proximity to infrastructure in the existing Bontangal Energy plant, which has available capacity, makes development Highly efficient and provides higher value for the gas. Last but not least, it is also worth noting the discovery derisk further Multi TCF exploration potential in the area. So by virtue of scale, participation level, efficiency of development, access to market In cycle time, Gaeng is a very meaningful addition to ENI's future upstream project pipeline.

Speaker 1

And now turning to energy evolution. A stronger CERM refining margin Higher refining availability, as we anticipated on our second quarter call, have combined for a good quarter from traditional refining With EBIT of $328,000,000 up versus a loss at Coutu, down somewhat The year on year on scenario effect not fully reflected in the SERM. Similarly, the strength in the scenario plus better utilization at Venice and Gela And the seasonally normal improvement in marketing have driven a solid $270,000,000 EBIT results from any live. We were also pleased to have booked our first contribution of positive net income from our biorefinery joint venture with PBF The Chalmet Refinery in Louisiana, well in advance of our original plan. And as a reminder, Income from investment in the Downstream is primarily our stake in the ADNOC refinery.

Speaker 1

Versalis continue to be impacted by weak demand, high energy cost and intense competition in the chemical sector. This emphasizes the importance of the recently completed Novamont acquisition With our intention to shift towards specialized and sustainable chemistry activities. It is now important to say that plenitude, even as energy market continue to be so challenging, is meeting or even exceeding all its operational and financial targets confirming the strength of our unique and integrated business model. EBIT for Plenitude for the quarter was 180,000,000 Equivalent to $280,000,000 of EBITDA. Along with Power, EBITDA of 2.90,000,000 Was 26% up year on year despite the significant results from open market power sales in 2022, With a strong contribution from retail and a significant increase in renewable power sold, we now expect Planning to 2023 EBITDA to be 30% higher than the original guidance.

Speaker 1

Startup of offshore wind generation at Dogger Bank And photovoltaic in Kazakhstan emphasized the operational momentum, while the deal agreed by Granite Plenitude joint venture with CDP To develop 4 new photovoltaic projects in Italy adds to medium term progress also. This distinctive growth profile I will continue to be a future of Plenitude as we double 2023 EBITDA by 2026, reaching 7 gigawatt of renewable capacity as well as increasing customers To over $11,000,000 and charging points to over $30,000 by the same date. That leads me to update guidance for 2023. We have narrowed the full year guidance for oil and gas production to between 1.64000000 to 1.66000000 barrel of oil equivalent, Which at the midpoint implies 2.4% growth year on year and a 4 quarter exit rate Of close to 5% growth year on year. We can confirm our GDP guidance in the range of EUR 2,730,000,000 We are raising pro form a adjusted Downstream EBIT to EUR 1,000,000,000 from EUR 800,000,000, reflecting the stronger third quarter and a better outlook For the last quarter in both traditional and biorefinery far refining.

Speaker 1

This is part offset by continued challenging condition faced by Versalis. Within Downstream, any live pro form a EBITDA is raised to €1,000,000,000 from guidance of more than €900,000,000 previously. As we have lighted, we are also raising our full year guidance for Planet II EBITDA to around 900,000,000 With these changes, we now expect replacement costs CFFO to be around EUR 16,500,000,000 up from 15.5 percent.16 percent previously and EBITDA to be around €14,000,000,000 2,000,000,000 higher than our midyear view. We are on track to deliver all our original target despite weaker scenario, condition than planned, With business outperformance across E and I, delivering around $2,600,000,000 of additional underlying EBIT. Our planned buyback remains at 2.2.

Speaker 1

And while we continue to spread to complete by April 2024, we are also accelerating its pace In the final month of 2023, with our dividend €0.94 per share for 2023, our distribution Is equivalent to 33% of expected cash flow from operation. We expect CapEx about $9,000,000,000 over 5% lower than our initial plan With a precise figure determined by timing around the project activity. This all means we continue to expect leverage in the 10%, 20% In conclusion, we continue to deliver excellent operating and financial results And strategic progress. We can reward investor, reinvest in the business for future value and maintain a resilient financial position in volatile times. Meanwhile, we are also transforming, building on our strengths and developing new line of business as opportunity presents themselves.

Speaker 1

This concludes my prepared remarks. And together with the E and I top management, I am ready to answer your questions.

Operator

The first question comes from Giacomo Romeo of Jefferies.

Speaker 2

Yes, good afternoon. Thank you for giving me this opportunity. First question is around Your shares buyback program, you Francesco, you can tell the fact that you have you are accelerating in Q4 the pace of the buyback. At current pace, indicates that you should reach around €2,000,000,000 by the end of the year. Just wanted to check whether When do you think that the €2,200,000,000 will be completed?

Speaker 2

Is it going to be Q4 results in February? And also, How should we think about how you will use the flexibility given by the EUR 3.5 €1,000,000,000 mandate from the AGM in order to bridge the period when you finish the €2,200,000,000 and the next AGM in May. The second question is on GGP. You left EBIT guidance unchanged. Year to date, you're basically EUR 100,000,000 from the lower end of this.

Speaker 2

Just trying to understand where the cautious outlook is coming from here. Is it related to the increased tensions in the Middle East? Is there any sort of do you have any visibility on potential negative impacts from contract negotiations next year In the next quarter, just if you can share some color there would be helpful. Thank you.

Speaker 1

Thank you. I will reply to the share buyback while I will leave the floor to Christian Signoretto for the GGP guidance. About the share buyback, first of all, you know that we have, as you mentioned, currently the 2.2% as a target and the flexibility Up to 3.5 percent subject clearly to the improvement towards our cash flow from operation expectation. So that flexibility will be, Let's say, optional in case that we will see an improvement above the €17,000,000,000 threshold That under the current assumption, we are not, let's say, yet achieved. In the quarter, You mentioned that we'll close according to your estimate around the EUR 2,000,000,000 I think that under the current estimate so far the past pace of EUR 60,000,000 Per week of buying back, this is a bit higher.

Speaker 1

So I will say that clearly, you will see In the coming weeks from the report that we published substantially at the beginning of each the increase of the pace, The expectation is to accelerate the buyback. It means that instead of concluding that within April, we will I think to have an acceleration. I do not disclose what will be, but you will see the figure in the Acquisition and the time that we will publish every week. Then now I leave to Cristian for more color.

Speaker 3

Yes. So thank you. So the 3rd quarter results were in line with expectations as guided in the last conference call. And the mild Marcotte actually guided us to that kind of guidance. When it comes to the Q4 and the range in the Q4 that we left unchanged, This is actually a result of the scenario uncertainties in terms of volatility, spreads, supply availability as well as [SPEAKER FRANCOISCO GATAI:] The outcome of an ongoing arbitration, which is going to be ruled in the next quarter.

Speaker 2

Thank you.

Operator

The next question is from Biraj Borkhataria of RBC.

Speaker 4

Hi, thanks for taking my questions. The first one is on exploration. Very helpful slide that you put in today. Obviously, this is probably the way ENI has created the most value over the last decade, and it's clearly a strength So I was just wondering how you're thinking about your exploration budget going forward and into the next couple of years. You see your U.

Speaker 4

S. Peers Buying Upstream Resource in quite a big way and clearly views on oil and gas demand are evolving. Do you think your exploration budget is appropriate As it currently stands, should you be doing more? And the second question is on Egypt. You have a big position there.

Speaker 4

I just wanted to get some thoughts from the ground Because LNG exports there have been minimal, which is kind of normal for the summer, but also we're not seeing much In terms of exports for October, I was wondering if you could comment on production levels of projects like Kyzor and the broader situation there. And then finally, just a quick one on the Indonesia discoveries. Is it fair to assume the target will be for these to feed Bontang and the For LNG, and I'm assuming there's capacity there for more exports, right? Thank you.

Speaker 1

Thank you, Biraj. I First of all, about exploration, just to have you seen in the past that we continue to perform? We perform through a budget that we're maintaining probably, Let's say in a steady way, notwithstanding the industry has substantially reduced this kind of activity because we also selected the capacity, the opportunity Near field and we were able also clearly to take advantage of our internal skills And the capability to process to our supercomputer seismic imaging and therefore to derisk this activity. I will leave it to Guido the answer about additional color on the exploration. Clearly, Indonesia plan of Valorization and Egypt Zohr production.

Speaker 5

Yes. On exploration, We may say that we have a very balanced and disciplined budget. As you know, we basically allocate money on ILX And near field opportunities and but also a minor component to the iimpact Well, and this was the strategy over the last 7 years, which proved to be very solid and which we delivered upon. About Gang, Gang is clearly it shows the successful of our distinctive Strategy focusing on gas, focusing on nearby infrastructure availability, Reinforcing our equity position in a very strategic area and also Supporting our dual exploration model and fast track development. So, GANG, it includes all these features.

Speaker 5

As you may have appreciated in the slide, we have quite a significant amount of resources Discovered, but also significant exploration upside, which would allow us, on one hand, to And expand the plateau of the current floating production unit in the southern area, but will also allow to Build a new hub in the North area, where we have a significant upside potential on the exploration, which could And significantly the plateau. In front of us, there is an LNG plant, Bontang, With a capacity of 22,000,000 tonne per year, which is, I would say, almost empty at the moment is The capacity utilized is 5,600,000 per tonne per year. So We will be plenty of capacity to accommodate the plateau production coming From Genk Discovery and the stranded assets, which we bought from IDD, both in the north and In the Southern area. I would also underline that this discovery is very liquid rich, and this helps Also a lot to enhance the value of the asset. As far as Zohr is producing from 2.1 to 2.2 Bcf per day.

Speaker 5

Now we are and it's in line With our plans, we are now running a number of projects and activities, Drilling activities in Filling specifically, but also other plateau extension activity to Enhance the capacity of the facility to handle the current level of production of Zohr.

Speaker 4

And just one quick follow-up on Egypt. Are you having any issues kind of On the currency side, given the devaluation and so on, in terms of getting money in and out?

Speaker 5

We are not having issues with the currency because our Contracts are in dollars, so we don't have any impact on the devaluation of the currency.

Speaker 4

Okay. Thank you.

Operator

The next question is from Oswald Clint of Bernstein.

Speaker 6

Yes, good afternoon. Thank you. I'd like Go back to Indonesia just to get a little bit more details. It's clearly a massive discovery. I was curious when you'll go after this multi TCF up Clyde, is this can you get this into 2024 exploration drilling plan where we can look at that?

Speaker 6

Is there any chance of any of the missing acreage blocks So on your map, they seem to extend away from this current discovery. Is there any license rounds coming up that you might participate in? And would you run this at 88% equity? Or I think Francesco talked about valorizing it at some point. Is that Couple of years down the line.

Speaker 6

That's the first question. Secondly, as we think about new developments in places like Indonesia, your friend, Mr. Pulitti at Oil and Money this year was saying he had to say no to a new FPSO job for a top client, Talking about lack of people, lack of supply chain pressure. So I don't know if that was you, but it feeds into the view the supply chain It's tightening up rather quickly. And so I wanted to ask about pressures you're experiencing and ultimately just how robust that 3% to 4% volume growth is In the 4 year plan.

Speaker 6

Thank you.

Speaker 1

Okay. About the dual exploration model, you know that this is something that you apply, generally speaking, In the various discovery, clearly, this will depend on the opportunities on the progress in term of development. It is a model that is, let's say, flexible, clearly by having an exposure on 88% after the acquisition, Neptune It's an additional opportunity to extract and fast track value. I leave then to Guido and then Aldo Napolitano that is at the head of exploration. The answer related to the development of the cost and the exploration upside.

Speaker 5

No. Clearly, The pickup of the activity, both traditional and Greece is putting pressure on contractor, both in term of Capacity and ability to deliver activity, but also in term of cost inflation, we know that From 2021 to 2022, there was an increase of 10% of cost overall, 7% from 2022 to 2023, and we Expect a 4% year on year in the following year. So this clearly is factored in our CapEx The quality of gang asset is such that we expect a very competitive Unit cost per development. In term of Further exploration, I would in the surrounding area, I would leave the floor to Aldo to give more color.

Speaker 7

Yes. Thank you, Guido. Yes, we are defining the plans for next year and the future years in terms of Further drilling in the areas on the Iqatai Basin. Maybe you have noticed that we have already actually pursued a Strategy in the acquisition of acreage in the area. So we have recently so just a few months ago, Today, we had the award of another block in the area, so the Perimahakam.

Speaker 7

And As already explained, we have increased our shares in all other blocks where we believe there's a good potential. So We have not yet defined in details our plans for future drilling, but certainly, this will be a focus area.

Speaker 5

You had also a question, sorry, on the confidence of the planned growth For production of 3% to 4%, this clearly we have a strong pipeline of project, namely, Balin in Ivory Coast, Congo LNG, A and E structure in Libya and last but not least, this gang Plus Mozambique and other project significant project from other affiliates and our satellites In Angola, a new gas project and Agogo Development and from Vohr, John Kasberg and Baldaric. So With this pipeline of projects, which has been most of them already sanctioned in the plan and in execution, we are Very confident to deliver this planned growth.

Speaker 6

Very clear. Thank you.

Operator

The next question comes from Alessandro Pozzi of Mediobanca.

Speaker 8

Hi, good afternoon. Thank you for taking my Questions. The first one is on an SSE in carbon capture And I believe recently you announced a new agreement with the UK with regards to Hynet and you secured basically And the first asset based regulated model, I was wondering if you can give us a bit more color on the economics and what are the, The pros versus more traditional model. The second question is on GGP, I believe you contracted a fairly large amount of new volumes on the LNG. You have a target of 18 And 1,000,000 tonnes per annum by 2016, and I believe that you are basically pretty much there With the new volumes, I was wondering whether you could see upside basically to the long term guidance there.

Speaker 8

And the final one, if I may, on North Geng. You talked about a lot of potential In terms of discoveries, I was wondering when I will you be in a position to finalize the size of the next The 2nd floating production unit and whether potentially that has the capacity of doubling the current production in the country. Thank you.

Speaker 5

Thank you, Alessandro. Two questions are for Guido. And the last one, the GDP is related is to Cristian. Yes, you're absolutely right. We have agreed with the U.

Speaker 5

K. Authorities, the main economic model terms. And however, the final stage to assign the definitive economic license is still ongoing, and We are planning to complete this process by the Q2 of 2024 in order to Have an FID, a cluster FID, which includes also the emitter by the quarter 3 of 2024. The pricing is clearly And the economic model is based on regulated asset base model, which is still, as I said, under Finalization with the regulator and it will include also some mitigations mechanism to reduce the risk related

Speaker 4

So it's basically is the return on the CapEx that you spend on the project?

Speaker 5

Yes. Basically, it is this is the mechanism of the model.

Speaker 1

Sorry, let me take note on the overall cost, including also the operating cost.

Speaker 3

Yes. So on the LNG portfolio, let's say, on the LNG supply contracted portfolio, As you said, we have advanced substantially with these last three agreements that we have signed. We are now around 13,000,000 tonne Contagel capacity, we want to achieve the 18,000,000 tonne by 2026. And sure, I mean, I think The big evolution on the Gangneh Dror discovery, this will give us some upsides on the target that clearly we are going to take into consideration when we We'll withdraw the next plan.

Speaker 5

Yes. As far as the size of the potential North Of course, it's still premature to say, but for the size of the current discovery and the asset and the knowledge we do Half of the asset, we are planning something which is between 800,000,000 standard cubic feet per day to 1 Bcf per day, with also a significant Liquid production between 50,000 to 60,000 barrel per day. This is for the knowledge, information and data we do have Today, of course, we are still assessing the discovery.

Speaker 8

Okay. So 50,000 to 60,000 barrels of liquids and plus on top the dry gas.

Speaker 5

The dry yes, the dry gas.

Speaker 8

So it's okay. So it's doubling basically, more than doubling the production from Indonesia at the moment?

Speaker 5

More than doubling Our production from Indonesia, as you know, the southern area hub asset, Jan Creek, As the capacity is producing 700,000,000 standard cubic feet per day currently and with The other asset discovered, which we will tie in as soon as the other asset would decline, we will maintain for longer This plateau, yes. So we are almost more than doubling the production.

Speaker 9

Very interesting. Thank you.

Speaker 8

And I guess FID probably sometime next year?

Speaker 5

Yes, this is the plan, of course, many moving parts, stakeholder engagement, Final assessment appraising of the discovery, but this is the target.

Speaker 9

All right. Thank you very much.

Operator

The next question comes from Eileen Himona, La Cite Generale.

Speaker 10

Thank you very much. My first question also on Indonesia, please, and congratulations on this substantial fine. If you could perhaps give us a sense With the knowledge that you have now a sense of timing for this start up. And then Is there enough uncommitted CapEx in the 4 year plan to develop it with unchanged CapEx? That's the first question.

Speaker 10

The second one On Venezuela, what does it mean for ENI exactly that the U. S. Have lifted sanctions at least for a few months? Thank you.

Speaker 1

In terms of CapEx, clearly, we are working on the 4 year plan with all the change that we are Discussing the sanctioning, the evolution of the portfolio, the new discovery that is clearly As a Hanai rating or ranking in our plan because of the clear advantage of these volumes In term of value, in term of cost, so I think that you shouldn't expect major increases. There is flexibility, as you mentioned. There are the commitment generally are clearly more focused on the 1st year than there are a declining Firm commitment in CapEx along the plan, so there is space room for accommodating New initiatives. On Venezuela, Venezuela clearly Now is an opportunity. Clearly, we are still evaluating Which are the option in term of creating an additional stream for recovering our exposure.

Speaker 1

So far this year, we can say we were relatively satisfied with the capability to keep Our exposure under control, obviously, the opportunity of having more volumes and higher production from the county Should help to increase also the number of lifting. I don't know if Guido would add something more on the Indonesia start up and Venezuela

Speaker 5

to it. No, no. Indonesia, I think I've said, which is the target for the FID. Of course, our approach on CapEx is To be disciplined and we constantly rank our project when there are asset which are More attractive than others, we reshuffle and we continue to reshuffle our activity plan.

Speaker 10

Thank you very much.

Operator

The next question comes from Michele Della Vigna of Goldman Sachs.

Speaker 11

Thank you and congratulations on the strong results. I have two questions. The first one comes back to Egypt. I was wondering if you could quantify the impact of potentially not getting any more supplies from Israel if the current interruptions continue And how that affects your GDP guidance. And secondly, going back to your balance sheet, I was wondering if you could clarify at least some of the moving parts between variable and fixed debt And how much benefit you can actually get from the abundant cash that you have on the balance sheet?

Speaker 11

Thank you.

Speaker 1

I leave to Christian the first answer and then we keep the second one.

Speaker 3

Yes, sure. So the current Shut off of the Tamar field clearly has an impact on the balance of the overall region because as you know, I mean, Egypt was importing and is still importing gas from Israel. And this has reduced the amount of gas available for export. On the other extent though, Now consumption in the country is decreasing substantially due to the normal seasonal effect. So I think, I mean, we will see export resuming once this effect will be notable.

Speaker 3

When it comes to the impact on GGP, the range that I gave that we gave for the guidance actually includes already The uncertainty on the supply from Egypt. So I would say the guidance is resilient to that impact.

Speaker 1

About debt, I think that we are in a very, let's say, favorable position As 80% of our debt is fixed rate, and clearly, we benefit from instead From the increase of rates and returns related to our large liquidity. Just to give you a figure that I think It's quite interesting. Last year, the net cost of our debt, so including the financial cost and the cash For the benefit from our financial asset was 2.3%. This year is 0.8%. So the increase of the interest rate is benefiting more proportionally our balance sheet And therefore, we are exposed to this trend clearly that we'll reduce at the end our overall net cost.

Speaker 11

Thank you.

Operator

The next question is from Henri Patricot of UBS.

Speaker 9

Yes, hi everyone. Thank you for the presentation. I have two questions, please. The first one on the guidance for 2023, EBIT raised to €14,000,000,000 for the year. I mean, if I look at the implied EBIT for the Q4, it looks pretty close to the EBITDA generated in the Q3, despite what seems to be more positive macro assumptions for the rest of this year.

Speaker 9

So I was wondering Whether there are other factors that could be negative or a bit offset This is for the macro environment in the 4th quarter. And secondly, I want to come back to eLife and Under the performance, so you could see the guidance going up for the year. Looking just on the Q3 year on year, there's a bit of a decline here. So I was hoping you could expand on the moving parts that you see in this business, whether you're seeing better performance on the boat Decide whether there is more pressure on the marketing business, interesting in any details here. Thank you.

Speaker 1

I have missed the second question. On the first one, you have to consider that this our business Are not, let's say, are subject to seasonal fluctuations. Therefore, you cannot extrapolate A linearity between the various segments, so there could be clearly more linear performance in the upstream, but GGP Retail marketing are all clearly following the different seasons. The difference or the main, let's say, variable part between the 3rd Q4 is that you have a lower contribution From the refining and from the marketing, downstream marketing, There is clearly, as we mentioned, a relatively mild change in the GGP. All the rest are relatively steady.

Speaker 1

In terms of the market of biofuel, I leave the question, the floor to Stefano Ballista.

Speaker 12

Yes. The 3rd quarter results for Any Life have been robust. We got to €271,000,000 There is a reduction compared to last year Q3. It's related to the marketing business and reason is twofold. Last year, we experienced One of the highest historical margin on retail.

Speaker 12

This year, year on year, we are experiencing on marketing retail a competitive Pressure that actually rose together with the rising of the oil prices. On the other side, we got extra result on wholesale activities, wholesale business, Still on marketing, and this is thanks to a new strategy focused on overall optimal trade off between volume and margin. This has started beginning of the year. And if we look at the global figures of the 1st 9 months, we are to a plus 9% compared to the 9 months of last year. We are landing at €611,000,000 of EBIT.

Speaker 12

This is due for this wholesale strategy and also given the optimal performance on Bio business. Given these figures, we see an EBITDA guideline increase to around €1,000,000,000 at the end of the year.

Operator

The next question is from Henry Tarr of Berenberg.

Speaker 13

Hi, guys, and thanks for taking my questions. 2, if I can. 1, I think you Shinden, an arbitration in GDP, potentially coming in Q4. Could you give any Color on the potential materiality or what that relates to? That will be helpful.

Speaker 13

And then just secondly, on Versalis. Clearly, the Novomont acquisition sort of gives an indication as to the aim for that unit. Is there anything else that can be done sort of on a medium term view to improve profitability there? And how do you see sort of margins Moving as we look into Q4 and 2024. Thank you.

Speaker 1

So two questions. The first for Chris and the second for Adrian Fani, that is the Head of Versalis.

Speaker 3

So look, the arbitration that I was referring to is Litigation around long term contract that has been ended already, so it's actually a past legacy. And the possible outcome are well within the range of the guidance that we gave you. So the guidance, as I said, He's resilient to that outcome.

Speaker 4

Okay. Thanks.

Speaker 14

About Versalis and the NovoMont acquisition, clearly, NovoMont acquisition was a major step into bio or green chemistry that Okay. And the whole portfolio of Versalis was pretty small. Clearly, now the main effort is To integrate this portfolio and to generate a complementary approach in term of channel to market and so to complement portfolio product, but also portfolio in term of Market participation and so to enhance and get the most of the synergy we can get. So we expect it to significantly grow The Novo portfolio, but at the same time, the portfolio of Versalis. As we said last time, we expect that in the next few years, we To shift around 15% of our portfolio to specialize in green chemistry, including, of course, within green chemistry and circularity.

Speaker 14

The situation in terms of chemistry industry is pretty challenging. We don't expect significant improvement in Q4 also because Q4 It's a low season for some market like construction, especially for the winter, although the winter is pretty mild. But We don't expect any significant improvement in Q4 from a profitability point of view, so pretty much in line with Q3.

Speaker 13

Okay. Thanks.

Operator

The next question comes from Massimo Bonazzoli of Equita.

Speaker 15

Good afternoon. Two questions. The first on Plenitude. How many clients do you expect to gain from the For coming liberalization process in the Italian regulated market and what would be the margin gap for the new clients compared to your current Average client. Second question on LNG, following the long term supply agreements with Qatar and Indonesia, Now do you plan to secure some of the volumes with your end customers for the gas offtake?

Speaker 15

Or would you like to keep those volumes for the spot market? Thank you.

Speaker 1

Okay. Stefano Goberti for the Plenitude question and again, Cristian Signoretto for LNG.

Speaker 16

Massimo, thank you for your question. First of all, we are following closely the process of the liberalization because we still have a lot of Rumor around, but no clear picture yet set. We will participate in the bidding. Still early time to see Whether our bidding will be very much successful or not, of course, we will play our game there. And in terms of margins, we let's see what's the rule of the game will be set at the end With the regulation in place, and then we will decide how to participate and what to do exactly.

Speaker 3

So on the LNG portfolio, as you can imagine, we have a strategy of allocating our supply portfolio 2 different line of business. So clearly, spot and keep the portfolio exposed to the spot market is part of the strategy. But also, I would say part of the strategy, especially for the portfolio which is more east of Suez, so clearly Indonesia would be part of that, It's also to secure an outlet for the long term. And this is, I think, a good moment also to be in the market given the appetite For long term LNG contracting in the East part of the world. And so we are currently actively marketing our portfolio in that part of the world.

Operator

The final question is from Alejandro Vigil of Santander.

Speaker 17

Hello. Thank you for taking my questions. I have two questions about Plenitude. One is about the performance of the retail business in the Q3 has been very strong. It can be extrapolated for the next And the second question is if you can give us any color about the process of looking for new partners in this for this business.

Speaker 17

Thank you.

Speaker 1

About the process, the process of sales, then I will leave it to Stefano for the question on the performance of the Q3. The process of sale is continuing. The discussions are continuing. A lot of details, a lot of, let's say, negotiation and paperwork to be completed. I confirm that we are proceeding.

Speaker 1

We don't see so far any major hurdles towards the conclusion. Then I leave to Stefano.

Speaker 16

Thank you, Alejandro, for the question. Of course, 3rd quarter was a very good quarter, $284,000,000 the EBITDA that we recorded this quarter, mainly coming from our retail activity. We have been working on the Overall, international European platform on managing the exposure. We have been working a lot on also defending Our activity in Italy with working on the client base and also offering the what we call it added value services. So Of course, these results are not one off are repeatable.

Speaker 16

That's why we also increased our guidance to year end to €900,000,000 of EBITDA.

Speaker 9

Thank you very

Operator

much. That was the final question. Thank you for participating in the ENI conference.

Speaker 1

Thank you to all the attendees. And please, if you have any additional questions, our Investor Relations team is available for providing the details. Thank you, and good afternoon.

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Earnings Conference Call
ENI Q3 2023
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