ENI S.p.A.

Good afternoon, ladies and gentlemen, and welcome to Annie's 2022 First Half Results Conference Call, hosted by Mr. Claudio Descalzi, Chief Executive Officer. For the duration of the call, you will be in listen-only mode. However, at the end of the call, you will have an opportunity to ask questions by pressing star and 1 on your telephone. I am now handing you over to your host to begin today's conference call. Thank you.

Thank you. Good afternoon, everyone. Today we will focus on three aspects of the year to date. Firstly, our execution on strategy immediately, volatile economic and geopolitical conditions. Secondly, the financial results that underpin our ability to invest and pursue our strategy across the cycle. And thirdly, our delivery of competitive returns to our shareholders. In a market characterized by extreme volatility and complexity, we continue to progress on our strategy with effectiveness and determination. Technology and its fast track deployment is a key element of our transformation. And in the first part of 2022, we delivered three major success. On LNG, with the on-plan and budget startup of Cora, offshore Mozambique, we have opened a new path for this country and developed a leaner LNG offshore scheme. This experience gained from this project will allow us to replicate a similar scheme in Mozambique and in other countries, by accelerating the time to market of gas resources and reducing financial exposure. We sanctioned the Balaine project in Côte d'Ivoire just four months after its discovery. It will be the first net zero development in Africa for Scope 1 and Scope 2 emissions. After a production test on the appraisal well, we can confirm the potential of at least 12,000 barrels per day and increase of hydrocarbon in place to around 2.5 billion barrels of oil and 3.3 TCF of associated gas. We expect first oil in the first half of 2023. And on future breakthrough technologies, the SPARC magnetic fusion plant construction is underway in Boston, with a planned startup in 2025. Eni is the largest shareholder in the CFS venture, and the successful $1.8 billion funding round at the end of 2021 will carry the venture through this important stage of developing a new source of clean energy. But our transformation is not limited to the deployment of technology. It also requires construction of new financially attractive business models to capture new investors and new sources of capital that will help to accelerate our growth. The success of Var Energy, the largest IPO of an oil and gas company in Europe in over a decade, is an example of our business combination model that we want to replicate. With Azzure, the partnership between Eni and BP in Angola, we are creating an African giant. All the conditions are close to being met and its formal establishment will take place in the next few days. With an average production of around 250,000 barrels per day and great potential of synergies in exploration, operation and development, Adulle will be one of the strongest upstream players in the years to come. We are also advancing in the creation of our company dedicated to sustainable mobility, targeting completion by the end of this year. This company, together with Plenitude in the retail household business, is functional to reach net zero scope three emissions in mobility. With the first vegetable oil produced in Kenya last week, and the development of network of agri-abs in Africa, we are on track to securing diversified feedstock to expand our biorefining capacity and we will reach a target of 35% vertical integration by 2025. Gas security is the key topic of this moment, a recurring concern for government, customers and investors. and it was already progressing with the replacement of third-party volumes with new equity gas, and after the invasion of Ukraine, we further accelerated this plan of substitution. We move quickly, leveraging our huge discoveries and strategic relationship. We sign new gas supply arrangements with Algeria, Egypt, Congo, and just last month we entered Qatar's Northfield, the world's largest LNG project. The initiatives are designed to deliver up to 20 bcm of gas supply by 2025. effectively uncovering 100% of 2021's Russian gas import. This gas will be produced in projects where any has a material upstream stake, securing diversified supply to meet customer needs, with also boosting any returns. Focusing now on the gas market itself. In order to protect companies from disruption in the short term, we have increased the flexibility and resilience of our delivery chain. On top of diversifying our gas sourcing and filling storage well ahead of winter, we have also diligently addressed our financial position. We have carefully managed our exposure where we deviate from our most hub-based pricing model. We have addressed potential mismatches in our supply commitment and we have ensured our financial hedging is consistent with our physical supply. To really place this in perspective, I want to emphasize that the company's remaining 2022 contracted obligations can be fully met with no Russian sources without any additional costs. Alongside managing an unprecedented level of market complexity and moving on with our transformation strategy, we continue to deliver excellent results. EBIT for the first half was €11 billion and for the second quarter €5.8 billion. We have generated €10.8 billion of CFFO in the first half of the year, fully funding our CAPEX of €3.4 billion and our ERA distribution plan. Importantly, our financial performance was not just in our upstream division, but also balanced with significant contributions from GDP in the first quarter and RNM in the second quarter. To this, we can add growing support from our associates that emphasize the emerging value of our satellite model. Even with the built-in working capital resulting from higher gas prices impacting both seasonal gas storage and sales, plus the effect of various portfolio activities, we have reduced our net debt, which now stands at 15% leverage, confirming our financial resilience and offering strategic flexibility. Upstream captured the improved scenario and maintained disciplined cost management to deliver almost 5 billion euros of EBIT in the second quarter. As we continue to focus on high-value activity, we also expect production to increase in the second half of 2022 thanks to project ramp-ups, for instance Koro in Mozambique and Dung in Angola, plus production to come on stream from Birkin fast track activity in Algeria and the reduced impact of major turnaround that affected Q2. Second quarter was also impacted by force majeure in Libya, Nigeria and Kazakhstan, which substantially explains the production shortfall against our expectations. In addition to the startups, we have made progress toward FID in the second half 2022 for the Marine 12 full field in Congo, Melea Phase 2 in Egypt, a number of new projects in Angola, plus the next Karajaganak expansion in Kazakhstan. Our exploration activities continue to yield excellent results. We have discovered 300 million barrels of resources in the first half. The second half of 2022 has already started on a very positive note, with the first appraisal well at Baleine. We are raising our guidance for discovery resources for the year at 700 million barrels. After a very good first quarter, a GGP broke even in the second quarter as expected. We see second half EBIT skewed toward the last quarter as in the normal seasonal pattern. The second quarter was a standout quarter for refining and marketing. It benefited from a robust scenario, but the results are really driven by a major increase in the utilization rate of our Italian refineries, which is 20% higher than Q1 at 90%, and our management of energy costs, impacted by high gas prices. In the first half of the year, we saved 200 million euros through energy supply optimisation. In May, we also restarted our Gela biorefinery, head of plan, contributing to the capture of favourable market conditions. In chemicals, despite a challenging market, Versalis has delivered positive results thanks to improved margins on polymer and proactive mitigating action on cost and energy uses. As a reminder, our investments for making Versalis a fully sustainable and differentiated company are focused on four strategic areas. Specialties, circularity, biochemicals and efficiency. In this context, by 2025, added value product will grow to over 40% of our portfolio. Plenitude continues to grow its renewable installed capacity by almost 35% year-to-date, and on track to add more than 2 GW installed by year-end. In the quarter, Plenitude delivered $119 million in EBITDA, nearly 50% above 2021. Thanks to its growing renewable contribution, and a retail performance features strong sales in solar distributed generation and energy efficiency services. We continue to see additional strategic value in a listing of the company and we confirm it remains our intention to pursue an IPO subject to market conditions. In line with the commitment we made in March, we have updated our assessment of the 2022 buyback upside price scenario, taking into account the Brent price to date and the expected trend, market fundamentals and potential risks. Accordingly, we are announcing an upside Brent price of $105 per barrel for the year as the basis of the incremental free cash flow to be distributed. In addition, the stronger foreign exchange rate and the strength of refining margins and the gas price led us to conclude that a larger 2.4 billion euro program, an increase of 1.3 billion versus our original target, is appropriate and consistent with our strategy. Based on the current share price, our dividend and buyback correspond to a distribution yield of 14%. We expect the buyback to be completed before the end of Q1 2023 and confirm we will further update our scenario and plan at our Q3 results in October. I will now summarize our update guidance before concluding. 2022 production guidance is 1.67 million barrels per day, in line with the original 1.7 million barrels per day when adjusting for the risk of ongoing force majeure interruption, most particularly in Nigeria, Libya, and Kazakhstan. We expect Q3 production to be broadly in line with their annual average. Exploration is expected to be the regional outlook with at least 700 million barrels of discovered resources. Now, see at the cost of around $1.5 per barrel. We confirmed 2022 GDP EBIT at 1.2 billion euro, a figure we raised at the first quarter, and plenitude full-year EBIT at over 600 million euro. Business action and favourable market conditions for R&M allow us to materially improve our guidance to an adjusted performing EBIT now expected between 1.8 and 2 billion euro. Looking forward, we are raising our guidance for 2022 cash flow from operation pre-working capital to 20 billion euro at $105 per barrel. Underlying annual capex is unchanged from the original plan and expected to be €8.3 billion at an updated foreign exchange rate assumption. We also confirmed our 2022 dividend per share of €0.88. and as I have just disclosed, we will announce total distribution with a share buyback of 2.4 billion euro to be completed before the end of the first quarter 2023. Leverage is expected to fall further to end the year at around 13%. To conclude, We have delivered significant strategic progress over the first half of 2022. We have continued to secure the long-term for rainy especially in the context of new gas supply while protecting it in the short term from the effects of the market volatility. We are moving forward in our energy evolution business growing plenitude and establishing a stand-alone sustainable mobility company. Our excellent financial delivery is critical to funding new investment plans through the cycle, being a reliable supplier of energy to our customers in all scenarios, and delivering on our commitment to our shareholders. So now I conclude my remark, and we are ready with our top management to answer your questions. Thank you.

Ladies and gentlemen, we will now begin the question and answer session. As a reminder, please press star and one for questions. The first question comes from Irene Gimona of Societal General.

Thank you. Good afternoon. I have two questions, please. Can you say what the cost of the various windfall taxes are for Eni this year in Italy but also the UK? And then secondly, on plenitude, should stock market conditions remain difficult for an IPO over the next 12 months, how does that impact Eni's strategy? Would you then instead consider selling to an industrial partner perhaps? Thank you.

Francesco is going to answer about the tax and then I say something about plenitude.

Yes, the sum of the two taxes is in the range of 800 million euro on an yearly basis. You know that we have already paid an installment related to the first payment of the Italian taxes, while the second part is 40% of the taxes that was in the range of 500 and the remaining part will be paid later. at the end of November and clearly the same will occur for the UK taxes.

So for plenitude, Clearly, what prevented us to go ahead with the IPO was clearly the market condition volatility. We are still there, maybe worse than before. And we are convinced and determined to go ahead when the condition will be established with the IPO. But we have to say in a light that the The strategic move is plenitude. It's not the IPO. IPO is clearly a good tool to give value and independence to the company, but the strategic move is plenitude itself because it's our, it's functional. to our aim to sell the carbonized product, green, blue, and biogas to our client to reach the net zero in our scope tree. So the strategy is plenitude. And then we have a tool to give additional value to the IPO. So we go straight with our strategy to increase renewables and what it's doing, because the planet is increasing at a very good pace, the renewables. But that is the strategy. I'm sure that we're going to find a good window of opportunity for the IPO. If you are looking at other ways, at the moment we are focused on developing our company at the best, and we'll see what we're going to do in the future.

Thank you very much.

The next question is from Oswald Clint of Bernstein.

Hi. Sorry, thank you very much. Yeah, just in the context, please, of gas security, I wanted to ask about Mozambique again. Gallup's chief executive keeps continuing to send your praises on coral LNG, but I wanted to get your thoughts on the potential for another coral floating LNG facility. And also, even on the onshore, are there discussions around smaller or mid-scale LNG trains at Ravuma that could perhaps allow you to get this project away in a shorter time period than many people expect. That's the first question. And secondly, good evidence of the natural gas reduction here in refining and chemicals. I wonder if you could just quantify how much percentage-wise you've been able to reduce. And actually, you know, even on GDP, I mean, Europe's now trying to reduce demand by 15%. I think you've seen some Decreases in Italy and France in the second quarter, but increases in Germany. How do you think the demand for your sales for gas plays out, certainly through the second half of the year, please? I know you've given the guidance for GDP, but that's just an overarching question. Thank you.

So, thank you. I'm going to answer for Mozambique, and then my colleagues Pino Ricci and Christian will answer for their remaining questions. So we are discussing. You know that we are working on the offshore and in our giant venture, in our companies with Exxon. and the other company who are in charge of the upstream and the offshore. Clearly, we are discussing, we are proposing a possible additional offshore development through LNG, the same fast LNG that we are developing in Congo. So something that is very fast, a small size that we can replicate, size that can range between 2.5 and 3 million ton per year. So that is something that is on the table. We are discussing. I can say that among our partners, there is a positive view, but we have to wait for a final approval. But that clearly is a way to go faster, to go faster and develop LNG in Mozambique. We have a huge amount of reserve there. In our block, we have about 80 TCF, so you can imagine that is the moment, so we are really focused and determined to to go through this development. For onshore, onshore is not in our hands. Clearly, it's in the hands of Exxon. The big train, all the engineers, everything has been done. I think that is just a question to understand if we find a reasonable security condition to develop these this activity but if we think about small size i think that the offshore we demonstrate the offshore is the faster one so i think that i i i never thought about small train on shore but i think that's a good way because there is no constraint uh is is there is a small size uh offshore allergy so now i now i i turn to pino for the other answer

Thanks, Claudio. About the gas reduction in the refineries, our reduction reached more or less 70% versus the previous one. This was a pathway started last year when in the second half of last year we started to the spike of price, 70%. And so when the Ukraine-Russia war started, we were already very strong to push again the reduction of gas consumption in the refinery. On yearly basis, this means approximately 0.6, 0.7 billion cubic meters of consumption. If you consider that in the same time, we cross from a minimum utilization of the refineries because low margin, COVID, low consumption, and so on, to a big jump to the maximum utilization because the lack of rushing. And so the combination of the two of the two facts allow us to reach this result and take into account that, for instance, our San Nazaro refinery today has gas import closed, completely closed.

Pino means that in San Nazario we are producing synthetic gas and we replace gas with other less expensive feedstock, energy feedstock. That is a secret. And then, you know, we jump from... 70% utilization rate to 90% utilization rate. So this action has been really important. And that explains also the difference between the consensus and the result, the same in plenitude. But I think that we can also explain that. Then there is a question about gas, so Christian can answer. Christian and maybe... Stefano, yes.

So on the gas demand side, as you pointed out, during the first six months of the year, in Europe, substantially, let's say, the overall demand has reduced. Well, differently in the different countries, because, I mean, we vary between, let's say, for example, in Italy, the drop was around 2%, and in Northern Europe was actually a bit more. The reason behind that was a bit warmer winter than last year, so we had less consumption in the... in this household segment. And clearly, after the spike of the prices, we have seen also some reduction in the industrial demand. Actually, Pino was talking about what we have done on the refineries to reduce the demand, and this is happening clearly a bit across the board. And we see... a reduction of around 10% on the industrial sector, especially in the very high energy-intensive sector. Going forward, you know, clearly you acknowledge the agreement that you will have about reducing the demand. And, for example, I mean, that, again, depends a lot on the various countries. For example, in Italy, even the specificity of Italy, this 15% actually boils down to 7% reduction. But the way we see the impact of the demand reduction vis-à-vis our accounts, we think that there is actually a marginal impact on that because, I mean, we will have maybe less revenues coming from the margins to our sale. But on the other hand, we are going to gain from optionality vis-à-vis the wholesale market and reduced capital absorption. So not a big element.

That's excellent. Thank you all.

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

Hello. Hi. Good afternoon, everyone. Thanks for taking my question and congratulations for those strong results. So two questions, please, on my side. First one, I am trying to understand the potential impact for ENI in case of a gas price cap for household in Italy, given that you are involved, you know, in gas distribution in Italy. So can you please remind us, you know, what is your market share on gas distribution for households? And can you also tell us if you hedged or not you're selling price to your customers via derivatives, or if you have, you know, to sell the gas, you know, to the spot price. In fact, I would like to know if, in case of a gas price cap for households, will you have to pay, you know, will you have to subsidize, you know, the households, or does it exist, you know, in other, let's say, organisms? which can, let's say, take that potential cost. And a second question regarding, you know, your renewable diesel business. So I remember that in February, you told us that in 2021, that business, you know, had a negative ABDA contribution. What about the first half of 2022? Are you seeing some improvement here, or would you say that the situation remains quite difficult because of feedstock cost inflation? Thank you.

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

Thank you, Claudio. Thank you, Nelly, for the question. In terms of gas price cap, very difficult to comment on a measure that needs to be implemented first to be commented upon. On our side, we sell gas to residential both on a fixed price, and in that case, of course, we hedge, or on a variable price index to the PSV. So in that case, we are naturally hedging in our portfolio. We have been managing a lot during these first two quarters through energy management, not to get hit by the volume risk, and I would say we have been successful because the results in the quarter have been very positive. The second question on the renewables, last year we had a minus 10 million result on EBITDA. These first six months, plus 90 million. because of our, I mean, generation and the prices that we are able to capture because of the, you know, unique model of plenitude of putting together merchant position on the renewable together with the client base.

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

This is quite commercially sensible information, so I would refrain from saying it.

Okay, no problem at all. Okay, thanks very much.

The next question is from Alessandro Pozzi of Mediobanca.

Hi there. Thank you for taking my questions. The first one is on the buyback. You increased it quite significantly to $2.4 billion. Would it be fair to say that basically any additional excess cash generation is going to be deployed through buyback rather than an increase in dividend? And you're happy with the with the split between dividend and buyback at the moment, given that the new dividend policy was introduced about two years ago. And also, in calculating the 2.4 billion, can you maybe give us a sense of how you got there, whether you're targeting a specific percentage of cash flow or whether you want to be above a certain level when it comes down to the leverage? The second question is on gas demand. We've seen Europe announcing a voluntary 15% reduction. In Italy, as I mentioned, it's 7%. But how exactly is it going to be implemented at 7%? I'm asking you because you're one of the largest retailers of gas. So how do you think that the 7% reduction voluntary demand in Italy can be implemented.

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

I can invent now. No, thank you for the question. Actually, you know that we presented the distribution policy in line with our strategy presentation, our strategy plan. clearly is built with certain rules. We set the rules at the start of the game and we do not change during the game. So the next update will occur clearly with the next strategy presentation. What we presented is a mix of tools. you know that we have a dividend policy that is a mix composed by a fixed and a variable element we designed a buyback and we announced that in march of this year that we would have a progress of this buyback in line with the price reference this is a actually what happened during this quarter so we do not expect to change the rules and therefore to change additionally these terms. About the calculation, just to give you some clarity, we announced last March that at $80 we would have between 6 to 7 billion of free cash flow. By now moving this 6 to 7, that was actually a 6.4 at the time, to the $90 that was the minimum, where we do not change the distribution of buyback, we would have reached almost 7.7. Now, you know that we have announced that our cash flow, free cash flow will be 10. It means that, sorry, 12. It means that we have 4.2, 4.3 billion of free cash flow. Multiplying this by 30% brings you to the 1.3 increase that is the sum that we added to the original 1.1. So this is the drivers of the calculation that we have applied.

So on the second question about the 7% reduction, honestly, we cannot answer to this question because there are a lot of different points, at least. And so we cannot talk about implementation. Why? Because we don't know. So it's something that we have to wait the ministry and especially if there is an alert to be ready. So the impacts on us, you didn't ask the possible impact of this reduction. Here we have a flexibility. Why? Because we sent to Italy LNGs and production that we can diverge, we can change destination. So if there is a reduction of 7% of gas, we have the possibility and flexibility to sell this gas somewhere else.

Thank you very much.

The next question is from Martin Ratz of Morgan Stanley.

Yeah. Hi. Hello. I've got two questions, if I may. First of all, would it be possible for you to sort of briefly sort of summarize the sort of Russia risk as in like if Russian gas volumes to Europe, including Italy, were to go to zero, how does that actually cascade through the company? I think There's a sort of broad amount of, you know, sort of misunderstanding about that. And therefore, I think it would be useful if you could sort of briefly explain it to us all. And secondly, about the Belain discovery, it sounds quite large. I was wondering if you could say a few words about it in terms of timelines or plans. It looks promising.

Okay, thank you. So the first question will be answered by Christian. The second one by Guido Brusco that I hope is online. Yes.

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

guido yeah okay you can you can talk a little bit elaborate on baleen yeah absolutely so baleen is clearly a world-class discovery very good reservoir high quality potential to produce up to 12 000 barrels per day we have already ongoing an early phase which we are planning to start up in the first half of next year with production up to 15,000 barrels. And clearly this appraisal campaign is setting the scene also for the second phase and its fulfilled exploitation, which we are planning at the moment to take an FID by 2023, first half, and with a target startup in late 2025.

Okay, that sounds great. You dropped off very briefly, so just to clarify, did you say the production potential of the field was 12,000 barrels per day? That sounds low.

No, no, no.

Each well has a potential of up to at least 12,000 barrels, which is the one we tested right now in this well. This is just to demonstrate and confirm the quality of the reservoir. The first phase is a very early phase, which we are doing with a vessel, which we have in our fleet. But clearly, the full field is something which will go well beyond 120, if not 150,000 barrels per day, the full field.

Yeah, yeah, yeah. That makes sense. Thanks for clarifying. Yeah, no problem. Thank you.

The next question is from Henry Patrico of UBS.

Yes, everyone. Thank you for the presentation. I have two questions, please. The first one, I was hoping you could share your views on the refining outlook for the rest of the year. I think you've used that reference margin of $6 per ball. We've seen quite a lot of volatility in the last two or three weeks. Sharp correction seems to be improving in the past weeks. Do you see a risk around the $6 per ball? And in particular, do you see any signs of demand destruction in your own retail network? And then secondly, I want to come back to the question of the gas supply and all these agreements that you've created over the last few months and whether there is room to accelerate some of these increased supply in particular in the energy area. You continue to have some discoveries on the upstream side. Could this increase to up to six, up to nine BCM be brought forward to some extent?

Yes, about the refining margin, of course, the so high volatility is due to the current contest that has two main drivers. First one is the very high price of gas, and the second is the war with the leak of the availability of Russian product in the market, the European market. What we expect in the next half of the year is that the gas price will remain very high and could affect the margin. And against this, as we... We told before we reacted with a very strong reduction of the gas consumption. And secondly, we expect a certain decline of the correct spread of product gas oil and gasoline. But even if the The demand of gas oil will remain strong also in the third, in the fourth quarter. At the end, we expect that in the second half, the margin of refining could be around $5, $6 per barrel, considering average, yearly average. That means that we will continue to be quite robust in the second half. Of course, not as the second quarter, but in any case, a very positive refining result.

Okay, so thank you for the question about the gas supply. I take the opportunity to give maybe a larger view on the model that we were changing starting seven, eight years ago. And so the two models, one is to buy gas from a third party, so Russia, and be on the value chain and sell gas. Our gas, so our equity gas, gas for which we run exploration, development, and production. So now we are setting also the contract that we signed that concerned the destination. We're just linked to our equity gas, the development we are running in the countries. So the question is how we can accelerate it. So clearly we set some program in terms of 3 plus 3 plus 3. I talked just about Algeria. And now recently an additional $4 billion. In these quantities, for Algeria, we are considering our equity gas plus solitary equity gas and development that are ongoing. How we can accelerate, we have discovered more. And Algeria is very not easy to discover, but once you discover, it's very easy to tie in because there is a strong pipeline networks and plants. So recently we discovered gas in Algeria. We tie in more than four wells. We are working our concession, but we are also helping, working very well in good coordination with Sonatrac. So it could be possible to accelerate and increase this quantity. It's something that we're going to see over the next month. The same kind of concept is we can apply it for Egypt, for example. Clearly, Congo is more limited because we are building the LNG. But I think that this is likely to happen because we have a lot of recent discoveries. So that can happen. I cannot tell you now possible details. Maybe we can disclose in the next months.

Thank you.

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

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

Okay, thank you for the answer. The first for Christian and Stefan and then Francesco.

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

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

Good to know.

About the working capital, you remember last year that we have this, let's say, positive contribution from what's called the cascade of derivatives, in particular on power. This clearly has impacted negatively. This year will move during the year. and we expect to have a negative impact related to that of one billion clearly included in our estimate of free cash flow in particular on the power but there will be also a recovery partial recovery on other derivatives that are cascading the opposite sense in the range of 300 400 million so that is the overall impact in terms of margin calls I can tell you that we are well recovered. We have just, at the current level of pricing, something in the range of $2 billion, $2.2 billion of cash absorbed. But you know that we have also $20 billion of liquidity capacity, so we are quite protected from any potential jump.

Many thanks.

The next question is from the clan Hodi of Kepeshevros.

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

Yes, Francesco. I'm clarifying because there are clearly two different levels. The one that was mentioned in the presentation and Claudio stated is related to the physical obligations. So we are able, substantially, to cover, in case of interruption of Russian gas, our commitment with no Russian additional contribution. With existing contracts, because substantially what we have done since the beginning of this year, as soon as we have seen the start of the crisis, we substantially create flexibility along this chain. The flexibility is not to take additional commitment, it's to look for additional source of supply. And on the other side, also from the financial point of view, in terms of derivatives, to interrupt coverage. So derivatives, let's say, buying in terms of these gas sales. Actually, there were some of this past coverage that were taken before the start of the crisis. And this is, let's say, the origin of the impact that... Christian has mentioned, so there will be an impact from the financial point of view related just to the unwinding of this derivative, but will be, let's say, relatively mild, taking into account that we have already substantially stopped and maintained as much flexibility as possible.

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

Clearly, as we said, it depends on many things. So it depends when it will occur. It will occur with its level of pricing. But at the end of the day, we are referring to a few hundred millions.

Okay, perfect. I think it was important to clarify because I saw Reuters' headline that In a case of disruption, you will stay free cash flow positive at the group level. So I think... No, no, no, no.

Christian was referring to the GGP level.

No, no, but I'm not saying that I understood that. No, no, no. It is the Reuters headline, I'm saying.

No, no, thank you. Thank you to precise that, because if we are just freaky at the group level, it's a serious problem. So thank you very much for the question, so we have the possibility to clarify. Thank you.

Thank you. Have a good day.

The next question is from Giacomo Romeo of Jefferies. Please go ahead.

Yes, thank you. Just two remaining just follow-ups, really. The first one is on the buyback, because you alluded to the fact that you could review your distribution at 3Q, but my understanding is that The AGM authorization is for buybacks up to 2.5 billion. So just want to understand how easy can this be moved and whether we could see a more material upside to the 2.5 billion authorization that you currently have. The second is on the windfall tax in Italy. What's your perception of the risk of these windfall tax being extended until a longer period of time and potentially change in order to address a larger taxable base. And just the question really comes from the fact that the Italian government has talked about a much larger financial impact from these windfall tax than what it looks like it will be based on your comments and some of the other Italian energy companies' comments. So I just wanted to understand sort of your view about potential downside risk on the windfall tax as we head into the winter.

Laura, first of all, about the buyback, and Francesco again, you are correct. We have 2.4 so far, but a limit in terms of authorization of 2.5. So still we have room, but it is 100 million. So in October we will update the scenario and the performance, and therefore there will be potentially this top-up in terms of buyback. On about the windfall task, first of all, we have to think that clearly we have worked very hard in actually to provide security for the country. So I think that if you look at the overall performance of ENIs in 2022, first of all, in managing a risk that is huge, in finding new sources of supply that ensure Italy in particular to have, let's say, better condition so far versus other European countries in terms of security of supply. For example, you can see also from the alert level that it's still at the level one in the country. We were able to fulfill our storage well in advance versus last year, practically absorbing 1.6 billion of our cash in this quarter. And we intervened to support Saipem very recently with the capital raising. So I think that we have made a very large contribution a large and diffused activity that is going more than just on a windfall tax. We think that any kind of taxes should be, in any case, designed in a proportionate way, in a way that is actually directly linked to profit, that is the most effective and most, let's say, clear way also for the investors.

Gentlemen, that was the last question.

Okay, thank you very much.

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