Repsol Sa Sp/Adr

Good afternoon and welcome to Repsol's second quarter 2024 results conference call. Today we will be hosted by Joseon Imath, our chief executive officer, with other members of the executive team joining us as well. Before we start, let me draw your attention to our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors, as indicated in the disclaimer. I will now hand the conference over to Joseon.

Thank you very much, Ramon, and thank you everyone for joining us today. To begin with, I'll take you through the main messages of this quarter before moving to our review of our business performance and results. Following the presentation, we will be able to answer your questions. The first half of the year, has allowed Repsol to move forward in the direction defined in our recent strategic update. We are addressing the challenges of the energy transition from a position of strength, leveraging on our advantages and on our value creation track record in low carbon. We keep on developing the new business platforms that will allow us to generate more value with less emissions, advancing in our multi-energy proposition and diversifying our energy mix. Last quarter, Repsol delivered another set of resilient results supported by a solid operational performance across divisions. The commodities scenario was characterized by a less favorable refining environment, a stronger oil price, and the ongoing weakness of natural gas. Second quarter adjusted income reached 859 million euros 4% of all the same period in 2023, and 32% below the first quarter of the year. Cash flow from operations was 0.9 billion euros, 32% lower quarter over quarter, and 45% below last year. Cash generation was negatively impacted by 1 billion euros payment, related to the acquisition of the remaining 49% stake in our UK JV and the settlement with Sinopec as agreed last year. Excluding this effect, the operating cash flow was 216 million euros higher than in the same period of 2023. Net capex amounted to 1.5 billion euros in the quarter. The contribution of divestments and asset rotation was 0.3 billion for a total of 0.4 billion euros delivered in the first half of 2024. Our discipline CapEx policy remains aligned with investment plan and our commitment with maintaining a strong financial position. Our businesses are carrying on an intense portfolio activity with the objective of optimizing our capital and financing new investments. Net debt stood at 4.6 billion euros by the end of the quarter, a 0.7 billion increase compared to March, mostly related to the purchase of treasury shares and new leases. In July, the company distributed the second dividend of the year for a total of 0.9 euros per share in 2024, approximately a 30% increase over 2023. In addition, this month we have completed the buyback program launched in March, executing the 40 million share capital reduction committed in our February presentation. These two concepts add up to 1.7 billion euros in total shareholder remuneration delivered as of July. Moreover, aligned with our strategic cash flow distribution objective, we have announced today a new 20 million share buyback program and its corresponding share capital reduction to be executed in the second half of the year. This will bring the total number of shares canceled in 2024 to 60 million, equivalent to 5% of our share capital at the beginning of the year. The number of shares outstanding by year end will reach €1,157 million. Considering the 3% increase of the funds dedicated to cash dividends in 2025 for a total of €1,128 million as committed in our strategy, the lower number of outstanding shares implies a dividend of a minimum of 0.975 euros per share next year. This is equivalent to more than an 8% DPS increase compared to 2024, with further buybacks completing our cash flow from operation distribution range for 2025. Looking now briefly at the macroeconomic scenario for the second quarter, The oil price continued to be affected by geopolitical instability and the production policy of OPEC countries. Brent oil averaged $85 in the quarter, up by 2% quarter over quarter, and 9% above second quarter last year. In gas, the Henry Hub averaged $1.9 per million BTU, 17% below previous quarter, and 10% lower than a year ago, driven by high inventory levels and technical restrictions still limiting US exports. Our refining margin indicator averaged $6.3 per barrel, in line with the same period a year ago, but 45% lower quarter over quarter. Compared to the first quarter, The sharp decrease in diesel and kerosene differentials more than offset the stronger gasoline spreads. The Euro-dollar exchange rate averaged 1.08 in line with the previous quarter and with the same period in 2023. Moving on now to the performance of our businesses, the upstream division reported unadjusted income of 427 million euros, a 4% increase over the same quarter last year, and 3% below the first quarter in 2024. Year over year, the negative impact of lower gas prices was more than offset by higher oil realization and higher volume sold. Our business remains focused on the efficient delivery of the project pipeline, actively managing our assets to capture emerging opportunities in the portfolio. Production averaged 589,000 net barrels per day in line with the previous quarter and year over year. Compared to the same period in 2023, the higher volumes in Marcellus UK and Venezuela were compensated by a lower output in Eagle 4 and Norway. and the divestment of our Canadian assets effective since the fourth quarter of last year. The head team policy implemented for our North American gas production is helping us protecting profitability in this depressed natural gas price scenario. Around 20% of our volumes in 2024 have been covered with a floor of $3 per million BTU Roughly speaking, this structure allows us to fully compensate in the second quarter results the decrease in the Henry Hub compared to the same period in 2023. During the quarter, we operated one rig in Eagle 4 and one rig in Marcellus. At the end of June, the rig in Marcellus was effectively released with the aim of protecting value in this gas price environment. In Eagle 4, we agreed the divestment of our stake in the southwestern portion of our acreage as part of ongoing optimization of our position in this asset. Development activity in our three main projects continue, progressing according to plan. PICA in Alaska and Leon Castile in the Gulf of Mexico are expected to start production in the next 12 to 18 months, contributing with a combined 50,000 oil barrels per day of profitable higher cash flow from operations per barrel production. In Brazil, the Campo33 project progresses under plan in cost and time. The development reached a significant milestone with the construction of the FPSO Q's first gigablock. In Venezuela, Repsol and PDVSA agreed to incorporate two new fields, Toboporo and La Ceiba, to the Petroquiriquire JV. These two fields currently produce 20,000 barrels of oil per day in gross terms, and let me say that this agreement is going to help us to recover past commercial debt, increase production, and improve the cash profile of the JV to repay the loan granted by Repsol, enhancing also the availability of troops to our refining system. Lastly, in the exploration front, after a quarter and the operator of block 9 in offshore mexico announced positive results in the dupat well the preliminary estimation is of around 300 to 400 million bars of oil in place and repsol holds a 50 percent stake also in mexico the development of block 29 is currently in the conceptualization phase and this new discovery increases the potential to consolidate this basin along with our growth plans in the region. Moving now to industrial, this division continues maximizing value in the current environment, strengthening the competitiveness of the conventional business while scaling up the newer, lower carbon platforms that will drive its transformation. The adjusted income amounted to 288 million euros, 16% below a year ago. The higher results in refining, chemicals and trading were more than compensated by a lower result in wholesale and gas trading and a lower contribution from our business in Peru. In this case, we have to take into account that we have the program turned around in this Peruvian refinery this quarter. The refining business benefit by high utilization rates, partially offset by a more challenging margin scenario compared to previous months, with some seasonality effects that resemble what we had in the second quarter last year. If you compare, the margin is more or less the same we had one year ago. The average margin indicator stood at $6.3 per barrel, declining compared to the first quarter, mostly due to narrower middle distillate differentials. And year over year, the indicator was in line with the same period in 2023. Margins have not yet shown the seasonal strength we were expecting at this point, mainly due to the elevated stocks in the Atlantic Basin. But, I mean, we are convinced that going forward, and thanks to a better demand for diesel and improved economic scenario in Europe, we are going to see this recovery. The margin premium was $0.3 over the indicator, materially below the previous quarter, and in line with the second quarter last year. Let me say that this premium was negatively impacted by the planned turnarounds in Porto Llano and Bilbao and a less favorable market environment. We have almost finished the turnaround campaign this year. The average utilization of distillation capacity was 87%, while the run rate of the conversion units reached 96 percent in both cases evolved the levels achieved in second quarter 2023. maintenance activity included the multi-annual turn around of puerto llano started in the first quarter and complete in may and the shutdown of the fcc unit in bilbao finalized in july and as i said before we have already completed all the major planned maintenance for the year. And that means that we'll increase our plants availability in the second half. Last quarter, our refineries received more than 5 million barrels of crude from Venezuela, which compares with the 2 million barrels processed in the first quarter in the year. And this increased supply together with the diversification of our crude diet should allow us to maintain the current share of heavy crude oil in our feedstock mix for the rest of the year. In the chemical business, Repsol's petrochemical margin indicator averaged €269 per tonne, 31% over the previous quarter, and 6% lower than in the same period a year ago. The EBITDA contribution was 23 million euros, which compares to losses of 48 million euros in the second quarter of 2023. Despite this relatively improved picture, thanks to better demand and margins, I mean, market is improving, it's true, but it's still being affected by the fragile situation in Western Europe, where we are seeing, let me say, some recovery in the market, mainly in the polyolefins market, but there is still a slowdown of Chinese economy that is impacting this recovery. Looking forward, the CNES expansion project, which is expected to begin operations in the last quarter of 2025, should contribute an EBITDA of more than 100 million euros even in this challenging scenario. Looking now at the progress in our transformation projects, last quarter has been the first one with the Cartagena Advanced Biofuels Plant producing at full capacity, thanks to the flexibility of its design, production, alternated HBO and SAF, depending on market conditions. The project is expected to contribute around 50 million euros of EBITDA this year at these low margins, because, you know, renewable diesel margins have experienced a decline in the last months, mainly due to the mandate cuts applied in Sweden and the oversupplied market in the US and the influx of Asian products into Europe. We see this situation as transitory, anticipating a progressive recovery as we move forward to 2025 with the implementation of the new blending mandates in both sides of the Atlantic. The demand is there, and we will keep working to build a leading renewable fuels platform in Iberia. The transformation of our traditional sites into highly integrated renewable biorefineries and circular hubs is the most competitive, fastest, and affordable way to reduce the carbon footprint of our operations. The project to retrofit an existing gas-oil hydrotreater to produce HVO in Porto Llano progresses as planned, with first production expected in 2025, at the end of 2025, the beginning of 2026. Also, the strategic agreement with Bungie, announced in March, will allow us to cover around 80% to 85% of our total biofuel feedstock needs by the end of this decade. Finally, renewable hydrogen in July, our electrolyzer projects in Bilbao and Cartagena refineries receive public European funds of 315 million euros. Continuing now with the customer division, our strategy remains centered on maximizing the competitiveness of our fuel business, consolidating our multi-energy offering and growing the scale of returns of retail power and gas. The adjusted income was 158 million euros in line with the first quarter and 7% higher year over year. And compared to the same period in 2023, the higher contribution of retail power and gas, aviation, lubricants and mobility was partially compensated by lower results in LPG. Mobility sales in service stations and wholesales were affected by higher imports and the alleged fraud practices of some operators aiming to increase their market share in Spain. The growth of the Wallet app continues to drive the expansion of our multi-energy offering. And let me underline this important fact because I think that I mean, we have reached more than 8.6 million total digital clients by the end of June. So digital clients using our apps to buy energy or some other products. Currently Repsol has around 350 service stations in Spain and Portugal offering 100% renewable fuel solutions with the goal of reaching more than 600 a year and 1,500 in 2025. This way, we are accelerating our plans to achieve, as we expressed and mentioned when we presented the strategic update in February, we talked about 1,900 service stations in 2027, so we are anticipating these targets, and we are going to reach the figure of 1,500 in 2025. And I mean, that's a figure equivalent to almost a 45% of our total network. Finally, in retail power and gas, Repsol's client base reached 2.4 million customers in June, roughly an 8% increase compared to December. So we are going on growing in this business, in this case in an organic way. And the contribution of this business remains very solid, having generated an EBITDA of around 90 million euros in the first half of 2024. Finally, in the low-carbon generation division, we progress in the development of our extensive quality pipeline, mainly in Spain and the US. The adjusted income was 1 million euros, positive in the quarter, negatively impacted by the decline in power prices in Spain, and a significantly lower contribution of combined cycles. This result compares to losses of minus 6 million euros in the first quarter this year, and a positive result of 12 million euros a year ago. The average pool price in Spain was 33 euros per megawatt hour, its minimum level since 2020, and that was driven by record level contributions of renewable sources to the Spanish generation mix. I mean, it was a very rainy half of the year, and the impact of the hydro production was, let me say, exceptional and very material, this half of the year impacting on prices. Now we have seen a recovery of these prices in July. And thanks to our integrated position in Spain, the low prices impacting the generation business are opening, of course, an opportunity in retail, as we discussed before. With our disciplined growth plans in renewables, working in parallel on our first asset rotation in the U.S. Our installed operational renewable capacity reached 3.1 gigawatts in June. And we are developing the new pipeline platforms with the goal of reaching four gigawatts of global capacity by year end. Having completed the FRI project last quarter, we are now looking to the startup of Outpost later this year, which is expected to add the first 400 megawatts of production in the fourth quarter and an additional 229 megawatts in the first quarter of 2025. In July, we have announced the disposal of the residential rooftop solar business in France that was, remember, acquired with the Asterium transaction. And finally, last week, we signed a collaboration agreement with EDF Renewables for offshore wind opportunities in Iberia, expanding our technological roots. Moving now briefly to the financial results in this slide, you will find a summary of the figures that we have discussed when reviewing the performance of our businesses. And for further details, I encourage you to refer to the complete set of documents that were released this morning. Moving now to our update outlook for the year. Starting with refining, our margin indicator has averaged around $8.5 a barrel year to date. Considering the current brand price and product spreads, we anticipate an average indicator of $8 in 2024. in line with our initial guidance and a ccs margin premium of around 1.7 dollars for the whole year over the indicator upstream production is expected to remain in the 570 to 600 000 barrels per day range as indicated earlier this year cash flow from operation is now expected to be in the lower end of our 6.5 to 7 billion euros range for 2024 mainly negatively affected by the lower gas prices this cash flow from operation figure doesn't factor of course the 1 billion euros payment related to sinopec litigation net capex after disposals and asset rotation is also unchanged at 5 billion euros for the whole year and finally considering the 60 million shares be redeemed in 2024, and the estimated cash flow from operations figure mentioned before, I mean the low range of this 6.5, 7 billion euros, a total shareholder remuneration in 2024 under these assumptions, of course, will be equivalent to around 31 percent of the operating cash generation. To conclude, we have completed the first half of the year with another remarkable performance, position to deliver on our objectives for 2024 in terms of strategic delivery, cash generation, and shareholder remuneration. The second half of the year will pivot again around advancing in our strategy and delivering value. We have made good progress in some of the upcoming FIDs as our teams remain focused on maturing the projects that will drive cash flow growth and profitability in coming years. We remain committed to our decarbonization route, leveraging the low-carbon solutions available to us required to decarbonize the largest portion of today's European economy that is not electrified. We are confident that the regulatory environment will evolve in a positive direction to guarantee security of supply, and the investment needed in our sector. With this, I will turn it over to Ramon as we move on to the Q&A session. Thank you very much.

Thank you, Yoshiyon. Now, as usual, before moving on to the Q&A session, I just would like the operator to remind us of the process to ask a question. Please, operator, go ahead.

Thank you. To ask a question, please press star, 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star, 1, and 1 again.

Thank you, operator. Now we move to the Q&A session. Our first question comes from at RBC. Viras, go ahead.

Hi. Thanks for taking my questions. The first one is just going back to the financial framework. So at the time of the CMD, Jesse John, you were clear around pointing us to the net capex guidance and suggested that if the macro was to weaken, you'd slow down the growth spending. So first half, 24 growth spending is at the run rate of just above $6 billion. So could you just update us on the divestment plans for the year, both in upstream and low carbon, and how we should think about that? I'm just trying to understand what goes behind the decision to go to the low end of the payout ratio range. Related to that, acquisitions like ConnectGen, is that included in the net CapEx guidance or is that on top of that? And the second question is just related to the U.S. gas hedging. You mentioned the 2024 hedges. Could you just remind us where you are for 2025 and 2026 and what's currently in place? Thank you.

thank you for for your questions and i'm going on to your first question i mean i remain confident about the net capex guidance of 5 billion euros for the whole year and as you mentioned this figure also includes the connect gen acquisition i mean that could be probably let me say a curious surprising seen the evolution over the first half of the year but i mean let me remind that i mean we are going to have in general terms over the strategic plan period some kind of a gap for the collage between the time of gross capex that is developed month after month and the rotation and the divestment and disposal process but we are expecting additional divestment far downs enough train and two asset rotation processes over this half in the renewable business, either in Spain and also in the first, let me say, round or basket of our U.S. assets. So, 5 billion euros is the net capex guidance we have for the whole year, including the ConexGene investment that, as you know, it was announced and almost closed at the end of 2023, but it was because the regulation permits and so on closed in the first quarter of this year. So this figure is included. If we go to the whole gas hedge strategy for the next year, in 2025, we have almost a 55, 60% of the total gas American production close with ACOLAR put coal with a put at $3 million BTU and the coal at 6.1 million BTU. So that means that we are guaranteeing this, let me say a floor of three and we have all the upside to $6.1 million BTUs. The figure I have here, more or less, approaches 57% of the total production of the year. When we go to the 2026 year, on the average of the strike we have, it's 50% of the total production. And, I mean, there are two different kind of position, but as average, I could summarize saying that we have a put, so a floor of $3.20 per million of BTUs and a call, so we are going to capture all this price till $5.1 million of BTUs. That is the strategy. Well, not the strategy, that is what we have executed for 2025 and 2026. At the moment, of course, we still have open strategies to increase this position in case of seeing market opportunities. Thank you, Viraj.

Thank you, Viraj. Our next question comes from Sasikan Chilukuru at Morgan Stanley. Please, Sasi, go ahead.

Hi, thanks for taking my questions. I had two, please. The first was on the buyback and the announcement of the 20 million shares buyback in the second half and the 60 million shares retirement overall for 2024. I was just wondering if you could provide some color on how we should be thinking about this 20 million buyback. Is this 20 million share buyback for the half year reflect the expected cash generation under current market conditions, or is the $60 million per share for the full year more reflective of the cash generation under the current market conditions? Slightly related to that, I was wondering how you came around to that 31% CFFO versus maybe the top end of your guidance change, 35%. Could provide some color on that. The second one was more of a clarification on your 2024 cash flow guidance. I was just wondering if that includes the 1 billion cash out for the acquisition of RRUK, if that is included or not.

Thank you, Sashi. First of all, we are going to launch the buyback program in coming weeks and that is going to be executed over the second half of the year. I mean, we will announce the development of this plan. And let me be crystal clear about why 20 million shares now, and why we are taking this 31% of cash flow for operation as a guidance this year in terms of distribution for our shareholders. First of all, today, our best approach and our best guidance is that because many of the gas prices, not only Henry Hub, also gas prices in Europe and so on, comparing with the assumptions we had at the beginning of the year, we are going to win the low range of this guidance of 6.57 billion euros. Of course, when I'm talking about 6.57, just for clarifying, in real terms is 5.56 plus the 1 billion applied to the Sinopec transaction. So, I mean, we are not taking into account, let me say this, 1 billion in order to define what is going to be the guidance for the shareholder distribution, as we said and we committed at the beginning of this year. So if we take this 6.5 billion euros, we think that from the guidance we expressed and we mentioned when we presented our strategic plan that remember was from 25 to 35%. And for, let me say, a good year, we said that we will be something in between 30, 35%. So, you know, we prefer to be prudent, sassy, seeing that, I mean, we have still some challenges in the year related to gas price and so on. And that would be, let me say, the commitment we are taking for the second half. I'm not going to hide that in case of seeing in October that we have a better cash flow for an operation than expected, a better business environment and so on, of course, We will apply, let me say, this rule of taking a figure, something in between 30, 35%, and we could have room for a potential additional buyback announcement in October. But I prefer to be clear and transparent. Today, we are not there. Our best view about the guidance for the year is these assumptions of 6.57 in the low range. In case of seeing a better environment, a better cash flow from operation generation, of course, we will follow this guidance because that is going to be, let me say, the driver we are going to have over these four years to define the shareholders' distribution. And for that reason, I said that for next year, the cash dividend is going to be a minimum of 97.5 cents per share, a minimum, because that is what we have today and we could commit today. In case of seeing a better environment, of course, we are open to change or to add an additional program, but today we are there. Thank you, Sachin. Oh, sorry, I think that I answered in some way. I mean, the guidance of cash flow for operation, when I'm talking from 6.5 to 7, we are not including the 1 billion euros of sign-off. That means that if we include the reduction of cash flow for operation coming from this announced transaction, the cash flow for operation will be 5.5, to six in the low range. Thank you, Sasi.

Thank you, Sasi. Next question comes from Michele de la Viña at Goldman Sachs. Please, Michele, go ahead.

Thank you again for your time. Two questions, if I may. The first one relates to your renewable plans in Spain. It looks like it's been a very tough environment in the second quarter. You've got great opportunities in the US, where actually the price, but also the power growth is more attractive. I was wondering if you are perhaps thinking of shifting some of your investments towards the U.S., or if you think that Q2 was a bit of an aberration in Spain and that profitability will recover in the coming quarters. And then secondly, I was wondering how your discussions with the government are going on the windfall tax. We've seen some more hopeful signs from the government, but I was wondering how that is progressing. Thank you, Mr. Jones.

Grazie mille, Michele. I mean, going to our renewable plants in Spain, first of all, let me say that we are quite comfortable about the rotation, asset rotation process in Spain that is on track. I mean, we have advanced in a significant way in this process. I think that today the probability of seeing a closing in the second half of the year is very high in Spain, starting from the asset rotation environment. Going to renewable plants, I mean, I'm not going to, I mean, let me first of all to comment some things. I think what we have seen over the last quarter, or better said, over the first half of the year, I mean, is not going to be the new, let me say, mainstream arena in Spain in prices terms. Probably, probably not. In many parts of Spain, the rain in liters per square meter over this half has been significantly higher than the average of the last 30 years. So that means that we have coped with a period, very good in terms of of grain level, but in terms of hydro production, has increased in a significant way, hydro production, reducing the time when the combined cycles are entering the system, and the prices drop in a significant way. I think I have in mind the figure of 30, 33 euros per megawatt hour over the last quarter, But when we see next quarters, I mean, I don't have a crystal ball, but what we are seeing is something close to 75 or 90 euros per megawatt hour. Even this July, we are figures that are closer to these prices I mentioned before that what we saw in the second quarter. So first of all, going to this part of the business. Secondly, New plants, you know, we rely more on the wind than on solar for new future plants in Spain. The reason is technically clear. The solar production is very concentrated in the central hours of the day. That means that the capture capacity of the wind production that is more distributed over the whole day because that depends on geographies, wind regimes and so on, has a better capacity to capture prices. So we rely and we are very confident about new wind projects in Spain. And in solar projects, we are going to be, let me say, more selective, more opportunistic. In some cases, we are going to promote hybridization processes in current wind farms we have, because, I mean, the capex level, because we could use utilities, infrastructures and so on, is lower. And we are also engaging a program to build solar plants in our industrial sites, where, because the tall regime and so on, the returns are significantly higher. So I take your point. The market is getting tough in Europe and particularly in Spain. But I mean, we are capturing in a good way the opportunities we have in the market, despite even though the results from the P&L we have seen in the quarter that is related to these prices drop. But as I said before, we have, and we are starting to build an integrated business. And in the P&L of the customer business, we are seeing, let me say, the positive part of this price drop. reduction in the pool, in the wholesale pool of the power system. Are we shifting to U.S.? Yes, but in a prudent way. As I mentioned when we presented the strategic plan, now we are building the outpost project that, as I mentioned in my speech, probably is going to add new 400 megawatts before the end of the year in 2030, more or less, in the first quarter of last year. And probably we are going to take some FIDs over this year. And we are going to have in production six gigawatts before the end of 2025, all in all, in our whole system. And probably almost 2.2 gigawatts by the end of 2025 are going to come from the US. we are quite comfortable about this shifting process to the US. Going to our rotation process of assets in the US, we are already involved in this program, and probably we are going to see in coming months the first rotation of our assets in the US. And that is going to be significant in the use of capital because, you know, we are looking for a 50% of disposal of these assets. And that means that we are going to remain probably with a capital and equity at the end of the process in every asset that is going to be close to 10, 15%. of the total capital we put as capex in this project. So the effect in terms of reducing the net capex of the company, as I mentioned before in my answer to Sashi and Viras, is going to be significant. Going to the windfall taxes discussion, I mean, first of all, I mean, we keep going. Our position, you perfectly know, we think that is unfair, is illegal, and that is going to be reversed by the judiciary, either Spanish or European system in the future. But my perception, I mean, I don't want to remind all the reasons we have to oppose this windfall tax Because my perception is that we are experiencing a new reality. You know, in November, the European Commission stated a report where they expressed in a very clear way that there is no reason now for this kind of taxes, that the priority has to be to guarantee the security of supply, the investment in the energy sector. Even over the last month, the Spanish prime minister said that this call in Spanish, grabamen, should be reanalyzed, that they'll have to rethink this grabamen to make investment possible in the energy sector. Even over the last weeks, the economy minister, Mr. Cuervo, said that when we talk about this windfall tax, we have to think and we have to prioritize the need of investment in the energy sector that has to be taken into account. So I could say more. I could say that in the current Spanish political arena, I don't know, a majority could make this windfall tax on this government permanent. But I mean, my point is we have a new reality. I think that, I mean, probably, we could anticipate that this potential gravament is going to be over in coming months. And of course, we are going to follow what could happen. And of course, we'll take our investment decision depending on the framework we could see. But I think that today there are reasons to think that that is starting to be a part of the past. And in the midst, we are working, of course, we are working in the preparation of our industrial sites to be prepared for a future scenario.

Thank you. Thank you, Michele. Next question comes from Lydia Rainford at Barclays. Please, Lydia, go ahead.

Thank you. And good afternoon. Two questions, if I could. The first one, I'm sorry, just to come back here, because I think I missed what you said. On the refining margins, where are we currently on those margins? And you talked earlier in the speech about you expect them to strengthen as we go into the second half of the year. I'm just wondering what dynamics, if you can just talk us through a little bit on refining supply-demand. And then a very different question, actually, please. On the upstream, we talked at the Capital Markets Day in Madrid back in February about a monetization event in 2026. And obviously, the upstream had very good results this quarter. I'm just thinking, where is your progress in the upstream compared to where you expected to be, both operationally and financially? Thank you.

Thank you, Lydia. I mean, going to the refining margins, I mean, being very concrete, of course, I don't have a crystal ball, but today our expectation for refining margins for the second half is for our system $7 a barrel. That when we are taking the guidance of $8 a barrel for the whole year, we are taking, I mean, the first part of the year plus these $7 per barrel. What is behind? Behind is mainly we see the gasoline is strong, We see that the concerns we could have two months ago related to the scarcity of heavy oil and so on, I think that we are going to have better discounts as expected. We see an increase of diesel demand in Europe that is going to be in the third quarter, at the end of the year, more significant. And we see potential events that could, and that is, I mean, we could take a statistical approach if you like, but that could be, of course, a winter that could be in some way a driver of this increase. Secondly, the hurricane campaign in the Gulf of Mexico is always a factor, because what we have seen that the demand and the supply are quite tight. And when the demand and the supply are tight, any event could reverse the current situation. And there are some announcements. Last week, for instance, Alexander Novak, the Russian vice prime minister, announced that because the scarcity of gasoline they have in Russia, they are analyzing the reinstating gasoline export ban in coming weeks. So there are factors related to what is happening in Central and Eastern Europe, the potential disruption coming from the Middle East. So all in all, I think that we are quite comfortable with this approach for refining margins. And taking into account that the turnaround campaign for Repsol this year is over, we are also comfortable with the $2 per barrel of premium for the second half of the year that all in all could have as a consequence the $1.7 per barrel for the whole year I announced before. Going to your question about the upstream, I mean, in operational terms, let me say that the FIDs, all the relevant FIDs, all of them were taken. The project's development is progressing as expected. I mean, the Leon Castile, Alaska, I mean, even the behavior of the whales is performing in a very good way. In Alaska, we are comfortable about the project, probably even more positive than we were some months ago, taking into account the behavior of the whales. The free cash flow generation is in line with the strategic plan in the upstream, going to the financial expectations you mentioned. And the production in 2025, at the end of 2024, is going to be mainly related or conditioned to potential inorganic transactions. In this dynamic of portfolio improvement, because you know we are going to have new barrels, better barrels, entering from the end of 2025 on, Alaska, Leon Castile, and so on. And we are going to reduce probably our exposure in some places where we think we can't create value. Thank you, Lidia. Thank you.

Thank you, Lidia. Our next question comes from Alessandro Pozzi at Mediabanca. Please, Alessandro, go ahead.

Yeah, good afternoon. I was wondering if you can give us maybe your view on what is happening in the moment in the biofuels market. You still expect to have a positive contribution from the new project for 2024, but the market is clearly much weaker compared to the start of the year. You mentioned Chinese imports, maybe the EU is putting in duties that could potentially help as well. But I was wondering how you see this imbalance between supply and demand at the moment evolving over the next few quarters. And also going back to the upstream, can you tell us what are the key, where you are with the next key FID that you're planning to take in upstream? Thank you.

Thank you, Alessandro. I mean, going to the biofuels, I mean, you are right. The current situation in the market is quite depressed. That is new. I think that the main driver was the reduction of the mandate in Sweden that put an additional one million tons a year in the market. That is significant because that could be something between 5-6% of the total European market. And what we have seen, I mean, the mandates are going to grow in 2025 in both sides of the pond. In Europe, there is also a clear indication in terms of growing in coming years in the current European directives, REG 2 and REG 3. So, I mean, the market is going to grow. And today we are, as you expressed, being a very weak balance on supply and demand. Today the prices are very low, $600 per tonne, more or less, in terms of HBO minus EUCO margin. I mean, let me say, margins are depressed, but even at these margins, taking into account our production, Cartagena C43 has an EBITDA of 50 million euros for a whole and complete year. So it's not the 180 we expected when we planned this plant, but if we take even what we had five, six months ago, I mean, $1,000 a ton of margin, and that we are going to have probably in coming months. I mean, this EBITDA will be closer to 140, 150 million euros coming from this project. So let me say, we are comfortable about the 343 in Cartagena. Not every biofuel project is going to get money. We have to be clear about that. But projects that are mainly brownfield, even Cartagena, because the integration level in utilities site and so on is fully integrated in the cartagena site and of course the puerto llano that is going to start in operation at the end of 2025 plus the integration in the site plus focusing in our internal market and repsol needs i mean we are comfortable with these fids we took with this production we have and i'm going to see more i mean we are working technically and preparing to take in in in some other spanish refineries new fids in coming probably two years so we have to prepare the projects in technical terms but what we are seeing is that because the mandates that are already approved in european directives we are going to have a very tight market in terms of supply demand for this kind of renewable fuels in europe and let me say more uh As I mentioned before, we are starting to sell 100% renewable fuels in our service stations. Already 350, 600 service stations at the end of the year. So we have seen even a specific market for this kind of products. Going to the upstream, probably two clear projects to take FID in coming two years. in the gas production in the Sumatra Island in Indonesia and Mexico. I mean, we are very happy with Mexico. You know that we have our two wells that were positive. We already have an area to be developed. And thanks to this discovery of the project operated by ENI, where we have a 50-50 stake, I mean, we see opportunities to optimize the whole area. I mean, we have, of course, to talk and to discuss about that, but I think that we have a clear case for a new FID that is going to support the sustained and improvement history of production barrels of the EMP of Rexalt. Thank you, Alexander.

Thank you, Alexandro. Next question comes from Alejandro Vigil at Santander. Please, Alejandro, go ahead.

Hello. Thank you for taking my questions. One question is about Venezuela. If you can elaborate about the potential recovery of loans and the agreements you mentioned as well in terms of heavy oil access coming from this country. And the second question is, in terms of your low-carbon business, you have about $5 billion euros of capital employed and the profitability, looking at the numbers, looks relatively low today. But I'm sure in terms of this asset rotation, basically you can confirm the profitability targets you have for this unit. Thank you.

Gracias, Alejandro. Going to Venezuela, first of all, we are entering a new dynamic in Venezuela, and that is important. I mean, when we were talking about the downstream, for instance, we saw that over the last quarter, we processed eight cargoes coming from Venezuela, and we are processing two more this July. In terms of recovery over the last months, I think that we have recovered loans by five cargoes supported by, I mean, paying the debt of Petroquilliquille and five cargos for the gas production in Cardona. So, I mean, we are improving in the right direction. There is a rationale behind this transaction we closed one or two months ago. You know, we have an agreement to incorporate two new fields, Tomoporo and La Ceiba. They produce 20,000 barrels gross. There is an agreement that establishes a direct allocation of a part of these Petroquilliquillo revenues to pay the financial debt that is owned by Petroquilliquillo to Repsol. We have potential synergies with the current wells and areas we have there, Barua Motatán, Menegrande and so on in the Maracaibo Basin. And, I mean, we have a strong potential to improve the recovery factor of fields because, I mean, we are talking in these new fields about five new billion barrels of oil in place. Of course, you have to multiply the recovery factor, but we are talking about five billion barrels. So I say that it's a win-win agreement. I mean, it's allowing us to recover. the past commercial debt, and we are advancing in this direction. We are starting to increase the production that is going to happen because we are starting to invest in this JV we have with PDVSA in Petrochili-Kire. We are improving the cash flow profile of Petrochili-Kire in order to pay the financial debt to Repsol. And we are also improving the feedstock profile of our refining system And it's very positive for the Venezuelan society because we increase production and we increase the tax payment coming from this production in the country. So we are quite happy. We are seeing the results. And I mean, we are working hard in this direction to optimize the execution of this agreement. I mean, you said about the profitability loops. I mean, let me say something. First of all, there is a part of the revenues and of the returns and of the improvements coming from this business that is not going to appear in this piano. I mean, every time we are rotating an asset, and in many cases, I mean, the buyers are acquiring a 49% paying 1.3%, 1.4%, 1.35%, 5%. times the capex we develop i mean this this acquisition of this disposal from our side and this let me say in figurative terms a piano is not technically a pnl because we maintain the control of the 51 it doesn't appear in what is the pnl of this business secondly i mean this business is growing That means that we have an instructor, we have developers, we have new companies like ConnectGen that they have cost, but they don't have revenues now. So we have, let me say, supporting an instructor that could be able to be operating 9, 10 gigawatts by 2027 and 16, 18 gigawatts by 2030 that is charged over the three gigawatts we have today in operation. So from the point of view of P&L, There is a temporary effect there. Thirdly, I mean, as I mentioned before, the first half of the year in price terms in Spain, where you have to take into account that we have a 50%, we include combined cycles, hydro, and so on, of the positions open. It's not the same in the US, where we have PPAs above 80, 85% of the total production. All that is behind what you mentioned of a weak P&L in the low carbon business. But again, in any project we have in our hands and we are disposing, in all cases, we have returns that are clearly above the 10% of the equity return in this business. So, thank you, Alejandro.

Thank you, Alejandro. And this question comes from Matt Loftin at JP Morgan. Please, Matt, go ahead.

Hi, thanks, Jens, for taking the questions. Two, if I could, please. First, I just wanted to come back to the numbers that you referenced earlier on the outlook around the cash return. If we take the low end of the sort of the six and a half to seven CFFO and 31% CFFO, I guess you're implying about two billion of cash return for the full year. Could you just clarify the sort of the assumptions or the numbers that you're assuming on the buyback side to get to the 31% because it did sort of seem to us as if there might be a bit of underlying headroom based on the 20 million shares within that already. And then second, on the payment that Repsol made to Sinapec related to the UK E&P business, could you just clarify with the CMD capital allocation outlook that you gave, how that was treated? Was it ever in your CFFO or net capex numbers, or was it always excluded and assumed to just be taken onto the balance sheet given the gearing headroom that you have?

Thank you. So, I mean, going to your first question, I mean, the assumptions are the dividend pay, that is 1.12, I think, billion euros this year, a 60 million share buyback, that all in all is 2 billion euros, more or less, probably speaking, and comparing with 6.5 billion euros, that would be behind the 31%. In any case, Matt, of course, you could check this figure with our IR team If either I'm not explaining that in the right way, that is always possible, let me say, or we have any kind of mistake. I mean, the IR team is going to check these figures for you. Going to the payment to Sinopec, I mean, of course, we also could check that, but there is no any impact on net debt because when you take, there is a reduction of the cash flow from operation, but in the other side, you have a reduction of a financial debt we commit in 2023. So when you take, I don't have in front of me now the exact, yes, I have it. I mean, when we take the part of this year in terms of of the financial part of the business, what we see is that when we take the interest leases and others, there is a positive figure that is fitting the negative one that is reducing the cash flow from operations. So there is no impact in any case in capital employed. Thank you, Matt.

Thank you, Matt. Our next question comes from Ayring Himona at Bernstein SG. Please, Ayring, go ahead.

Thank you very much. Just John, you mentioned that you have received around 300 million euros of EU aid for the renewable hydrogen projects. Do you treat that as part of net capex in your first half numbers and have you applied for other potential aid which may come through in the second half. And my second question, following the settlement of the Sinovac litigation, you still have an outstanding issue with the potential liability for Peru, the oil spill in Peru. You have taken a provision there. What is the total amount you have been sued for? And what is your lawyer's best estimate for a timeline to resolve this? Litigation, please. Thank you.

Thank you, Irene. I mean, first of all, I mean, there is no anything in our accounting today related to this announcement that was done by the European Union and Spanish government. So we didn't receive yet any proceeds coming from these subsidies you mentioned. in case of going on and investing that would be considered as less capex. So, but again, as I mentioned before, when I answered, I think that it was to Michele, we have to, I mean, now with these subsidies to reanalyze the project, to see the potential returns, to analyze the environment in tax terms, in business terms and so on, and we'll take our decisions over the year 2025. But in any case, that is going to be treated as a contribution to net capex. But again, there is anything today, there is not anything in our accounting, and probably that is not going to be in 2024. If we go to the oil spill in Peru, I think that for this purpose of everything linked to containment, cleaning, monitoring of all the affected areas to minimize the impact to the environment, again, underlining that we were not legally responsible for this spill, but we take the responsibility, let me say, in moral terms of leading the cleaning of the area. Remember that this spill happened due to a sudden movement of the Italian ship Mare Doricum during unloading of crude oil. And that was the reason causing the pipeline fracture. So all in all, we have spent more than 350 million in this clean remediation and social compensation. By the end of last month, by the end of June, I think that the final compensation agreements were closed with more than 98% of the impacted people taking into account the database of individuals that was done by the government. We have a total estimation of today of 470, 480 million euros at the end of the road. And of course, we have to take into account also the assurance recovery that is also going to be significant. So that will be, Irene, all in all the summarized I could develop now about the oil spilling in Peru. Thank you.

Thank you, Oriol. Next question comes from Pedro Alves at CaixaBank. Please, Pedro, go ahead.

Thank you for taking my questions. The first one, I'm not sure if you have detailed before, but within your CFFO guidance, apart from the $8 per barrel in terms of refining margins, what are your other macro assumptions, namely Brent prices and Henry Up? And the second question with regard to your asset rotation plans for the second half. So within the 5 billion net capex guidance, just wanted to make sure that if you are still aiming for roughly 1 billion from renewables and now almost 0.5 billion from upstream, as you got it before in the latest call. Thank you.

Gracias, Pedro. I mean, figures I have here in mind in the The assumptions are for this 6.57 in the low range of the cash flow, so close to 6.5, is $80 a barrel, $2.4 million BTU per 100 hub, $8 a barrel per refining margin, 1.084 dollar-euro change rate. And I have to check this figure. I don't have this figure now, but I think that in terms of TTF and MVP, that is their impact in other way. We are thinking of assuming something close to 9, 9.10 dollar million, but you more or less, but I have to check this figure, you could... 9.6. I mean, here I have a... I have recorded the 9.6 for TTF, and it seems to me that the MVP would be a close figure. The net capex guidance is this 5 billion I mentioned before. And yes, we are including in the second half of the year, with a quite high probability an asset rotation process in Spain and the first, let me say, round of the new projects in operation in the US. In terms of materiality, probably the US is going to be more important because here we are going to have not only, let me say, the entrance of a new investor, but also the consolidation of the prior finance in the U.S. that are going to be also part of the equation. Thank you, Pedro.

Thank you, Pedro. Next question comes from Fernando Abril at Alantra. Please, Fernando, go ahead. Hi. Could you hear me?

Perfectamente, Fernando.

Okay. Hi. Just one question is with regards to the capital structure of the company. So I don't know if you can give us an update on the... on the different net debts by the main vehicles you have. Upstream, which is 75% on renewables, and then the remaining of the business, because it's been almost two years since those acquisitions took place. If I recall correctly, Upstream had more than $5 billion net debt allocated, and renewables half a billion net debt. So I don't know how things are as of today, more or less. Thank you.

yes gracias fernando so what i could disclose now is that i mean the the the total net that the net that is the consolidated of the group is 4.6 billion euros it seems to me i have to check the figure but 4.3 are leases so in terms of Let me say, following the old criteria, it will be only 0.3 billion euros of net debt. And there are some intercompany financial loans with different vehicles. But, I mean, we could check and discuss the exact figures with the IR team, Fernando. Thank you.

Thank you, Fernando. Next question comes from Henri Patricot at UBS. Please, Henri, go ahead.

Yes, thank you, everyone. Two questions for me, please. The first one, coming back on upstream disposals, there have been a few reports about potential disposals in recent weeks. I was wondering whether there's any change in iterative preference between disposals making asset disposals or going for an IPO later on, whether that's still something that you'd be looking to do. And then secondly, on the Puerto Lano biofuel project, which you now show as a first production in 2026, I seem to remember that it was a 2025 project previously. Is there any delay here at the Puerto Lano? Thank you.

Oh, merci, Henri. If we take, I mean, we are not factoring in our strategic plan any proceeds coming from a liquidity event. So that means that that is going probably to happen because we have the commitment to prepare the EMP company for a liquidity event for the first quarter of 2026. Of course, we have to check the market at that time and see if that is going to to happen or not, or in which way it's going to happen, this liquidity event. IPO, of course, is one of the central possibilities we are working in. In the midst, the disposals, they have a rationale of improving the quality of our EMP business. Remember that we insist a lot in our strategic plan that, I mean, it's more important For us, the way at the end of the road, that means that the IPO or liquidity is very important, but in the midst, we have, first of all, to improve the quality of our portfolio. So after investing in Ecuador, Russia, Canada, Malaysia, Vietnam, and so on, we are going on in this roadmap of having, let me say, less countries, but with some more capacity to grow in. Secondly, we are increasing the cash flow from operations per barrel. So the new barrels that are going to enter in the Gulf of Mexico, US, and so on, and in the future, Brazil, Campos 33, are better barrels of these barrels we are going to dispose. And in this, let me say, logic, we are going to, and we are touching, let me use the term, the market, to see if some potential disposals, or in some cases, why not farm downs of some projects we are investing in could be possible. So we are engaged in these kind of processes. And for that reason, we always say that, I mean, we are putting some kind of floor of 550,000 barrels a day of production because we could eventually see some disposals before seeing the new barrels. Remember that we are going to have new 95,000 barrels a day of new barrels coming from the projects we are developing in an organic way. So that is the rationale and the logical way behind these disposals. In the case of the Puerto Llano retrofitting project, as I announced at the end of 2025, the project will be operating, be sure that, I mean, the commissioning process and so on, probably we could enter in the first weeks of 2026, but I mean, we are factoring the best, the same operation date we announced before the end of 2025.

Thank you. Thank you, Anghi. Next question comes from Paul Redman at BNP. Please, Paul, go ahead.

Hi, and can you hear me?

Yes, we can hear you.

Perfect. I just wanted to ask a quick question about these comments on upside to CFFO and potentially more distributions if that's the case. Is that all driven by a macro movement or are there other moving parts on an organic basis within your CFFO that could get you to essentially top end of the range of 7 billion? And is that enough? You're currently talking about bottom end of the guided range on cash flow from operations. If you get close to 7 billion, will you update the distribution program at that point? And then secondly, just on production, even towards the top end of the guided range of 570 to 600 MBOED, what's the drivers of either the upside or the downside on the range that you've guided compared to what you've got in 1H24?

So, thank you. I mean, the Potential upside is not operational. I mean, because what we are factoring is that our refining plants and so on, they are going to operate in a normal way. So it could come from the macro scenario. And probably the most, let me say, significant drivers would be a better expectation about the refining margin. Secondly, a better brand price or a better price gas prices either in the U.S. or in Europe. In Europe, because, I mean, it seems to me that in case of entering in a winter that could be, and I don't know of course, because I don't have a crystal ball, but colder than the last two winters, I mean, probably the gas figure and the gas expectation could be different. So, but, I mean, I don't want to to build, as French people say, Chateau de l'Espagne. So things that are, let me say, figurative. I prefer to have solid pillars and the expectation we have was reflected in the guidance we mentioned. Again, in case of seeing a better macro scenario coming from the factors I mentioned before, We are, of course, committed to improve the shareholder distribution following the guidelines we defined in the strategic plan. Going to the production, I mean, the main driver could be a potential disposal in terms And we have potential drivers to increase this production. But again, I prefer to be proud that the potential drivers will be first Venezuela, where we are increasing the production and in case of performing in the right way, following the agreement we have, we could see good news in Venezuela. UK efficiency, where after taking the control of operations, we are performing, let me say, in a more focused way, the asset, and we could have better news coming from the UK. Wyoming is performing in the right way, and we could see a potential upside and increase of production. And, I mean, you know, the non-conventional, the unconventional is always a shift production. You know that we have one rig in Marcellus. We shoot down this rig at the end of June because the current hammerhead prices, but in case of seeing a better gas price arena in the US, so we are ready to go on. So there are potential drivers to go to the high range of these 600,000 barrels a day. And from my point of view, to go to the lower range, I mean, disposal will be the main driver.

Thank you, Paul. Next question comes from Kim Fuster at HSBC. Please, Kim, go ahead.

Hi, good afternoon. Thanks for taking my questions. We've got two. First one is more of an accounting question. The non-controlling interest was a positive number this quarter as opposed to a negative number. And it seems that even when it is negative, it's a much smaller figure, pretty much every quarter, ever since you sold 25% of your upstream business. Could you maybe explain why that's the case? Why it's such a small figure? And secondly, I've seen media reports that you're considering merging your North Sea business with a P vaccine-dependent EMP. So what would be the rationale and benefits in such a combination? And is that move triggered in any way by the potential changes in the UK fiscal environment? Thank you.

Thank you, Kim. I mean, of course, what I'm going to say now, perhaps you could check it with the IR team later, but what we have in mind is that this minority interest, I think that is around 209, 210 million euros in the second quarter, is mainly the dividend to the partner in the JV of the EMP. I have to check this figure, but it's mainly this figure, and there are another one, but they are not material, a dividend in the Valdez Solar project, probably to the partner of the refinery of Petronor is also there, but are small amounts of money. So it's mainly the dividend to the partner in the JV of EMP, but I mean, You could check these figures, please, because that is what I have in mind with the team of IR. Going to the North Sea business merger news. I mean, first of all, the change in the UK environment for the best and for the worst is not new. I mean, I think that market has discounted what we are seeing now over the last year because the the kind of approach of the Labour Party that now is ruling the country was perfectly known some months ago. Now, I mean, we have to see and to check, I mean, what is the approach in terms of combining how they see the oil and gas business and the effort to keep going and to maintain this business that is very significant in areas like Scotland and mainly the area of Aberdeen. But I mean, that is not in our hands. We have to wait and we have to see. But what is true is that we have ways to improve our business in the North Sea. And, you know, we have a significant pool of tax notes from the former talisman coming from the past. And we could optimize these tax pools either merging or having any kind of inorganic transaction with some others, we are working in this direction. I'm not going to hide it. And on top of that, I think that, as I mentioned before, we are seeing potential efficiencies in the UK, and I'm sure that merging with some others could be also a way to increase the level and the ambition of this synergy. So we are going to work hard in this direction in coming months, because let me say that what will happen and what we could improve our business in these directions is independent from the, let me say, political or regulatory environment in the UK. Thank you, Kim.

Thank you, Kim. Next question comes from Matt Smith at Bank of America. Please, Matt, go ahead.

Hi there, good afternoon. Thanks for taking my questions. The first one was coming back to the buyback. Sorry, I was coming to a similar conclusion as Matt earlier. Perhaps a simple way to sort of round off the question would just be to clarify whether you expect to announce another buyback tranche at your next set of results in the current macro environment, or is the suggestion that you would need an improvement to the current macro backdrop? to increase that payout ratio. So it's the first question. And then my second question would just be on the refining trends, if I could. I think the availability of heavy crudes has been favorable to Repsol, whether that be Mexico or Venezuela. But I wanted to touch upon the crude differentials, if I could, whether you've sort of seen any trends there, whether that's playing into the premiums at all. Thank you very much.

Thank you, Matt. I mean, I announced eventually, or not, that it's going to depend on the third quarter, this new potential share buyback. But, of course, if there is a clear market condition improvement, improving the guidance we have for this cash flow from operation, be sure that we have another one in October. And I announced In that case, this new share buyback program in the presentation of the third quarter. The crude differentials, what we are seeing is positive, as I mentioned before. It's true that in April, May, we had a very bad expectation related to the announcement done by Mexico, by Pemex, about the reduction of the exports of heavy oil and so on. But it's true that over the quarter, I mean, Pemex and Repsol, we were able to maintain more or less the same level of commercial relationship we have had over the last year. So there is no any negative impact. And it seems to me that that is going to go on in the future. The impact of Venezuela is, of course, also positive. That is impacting in a positive way in the premium. And for that reason, even though the situation of the biofuels market I mentioned before, we are factoring this $2 a barrel of premium for the second half of the year, and all in all, this $1.7 a barrel for the whole year. Of course, the absence, the lack of turnarounds campaigns in the second half is the main driver to have this target, but being quite comfortable about this heavy crude supply, is also one of the reasons for factoring this figure. Thank you, Matt.

Thank you, Matt. Next question comes from Ignacio Domenech at JV Capital. Please, Ignacio, go ahead.

Yes, thank you for taking my questions. I just have one, which is a follow-up on the CFFO. on the moving parts of that 6.5, 7 billion guidance. The macro assumptions are clear. But I was wondering on taxes, which have been relatively low so far this year. I believe that in the second half you still have part of this windfall tax. But I was wondering what's roughly the figure that's embedded in the 6.5, 7 billion guidance. and also on working capital. I believe in the past you expected this to be neutral, so after the maintenance carried in the first half of the year, just wanted to make sure this is still the case. Thank you.

Gracias, Ignacio. We have received many questions over the morning from some of you related to this, let me say, low tax of 45% of the EMP. I mean, we are probably quarter after quarter explaining what is happening in the EMP to pay, let me say, a lower interest, a lower, sorry, tax rate that we had in the past. Let me say that, of course, I don't have a crystal ball. Things could eventually change up and down. But I think that 45% is the new normal in the EMP. Why? Because we are changing our portfolio. And portfolio means that we have more U.S. Some countries like, for instance, New York and Tobago, they have less results than they have in the past. So we are changing the basket of results of the countries. And Because every country, every jurisdiction has a different tax rate. All in all, it seems to me that we are going to be closer to the 45 in the future than for the former 49, 50 we had in the past. Of course, we could explain differences because sometimes we see 42 and sometimes 46. But it seems to me, and I think that you could take into consideration in your models, that probably 45% is going to be the new normal. And today the best approach we have is the second half guidance is going to be similar to the first half. Thank you. Gracias, Ignacio.

Thank you, Ignacio. Next question comes from Anish Kapadia at Policy Advisors. Please, Anish, go ahead.

Good afternoon. Thanks for taking my questions. Just a couple of questions. One of them is on some of the political changes in Latin America, specifically in Mexico with the change of government and then potential change in Venezuela. If you can just update on how that's changing or potentially changing any of your plans over there. And then the second one is looking at the hydrogen business and the prospects for it. You've talked in the past about investigating the potential for geologic or natural hydrogen. Just wanted to see how you progress with that, how you're seeing the potential and whether you're kind of putting capital into exploration over that. Thank you.

Thank you, Anish. So, I mean, Mexico, I think that, of course, we have to see that we have a new president that in some way she has her own personality that is, of course, some kind of continuity in the best sense of the word of the president, López Obrador. So, our perception is that these Mexican authorities then and now they are fully focused in promoting the local resources and to increase the power of Mexico as a country relevant in terms of producing hydrocarbons. So I think that in this framework they launch this openness to international companies. We have been part of that. We have discovered resources, and it seems to me that we are fully focused in the upstream side to this Mexican, let me say, driver of recovering the oil production in the country. I mean, we want to be part of this history, of this narrative of Mexico in the future. Going to Venezuela, of course, there is an open election process. that is going to celebrate next days. And our only word is, of course, respect. Respect to Venezuelan citizens and their voice. And of course, we will go on working with the representatives selected by Venezuelan society. But let me say that the framework we have in Venezuela now is positive for Repsol, but I think that is very positive for the people of Venezuela and for Venezuelan society because We are working in a framework with the respect to all international legal frameworks where we are contributing to increase the production of Venezuela, to increase the tax collection in Venezuela, and at the same time, increasing the revenues of these JVs and helping to pay the historical and commercial debt We have either Petrochiri-Kire with Repsol or the debt related to the gas commercialization in Cardon. So it seems to me that this framework is positive and is going to go on. Of course, with my whole respect, the decision of the people of Venezuela is going to be positive in any case, and we are going to do our best to work in this direction. Thank you. Ah, hydrogen, sorry. I mean, you are right. We have developed some technical works, mainly in the Spanish northern part of the sea, what is called the Gulf of Biscay. And I think that we have seen and identified some areas that potentially could be geological storage for the future but of course any investment or development on that is going to depend on the evolution of of the hydrogen market it seems to me that in coming three four five years a relevant part of the hydrogen that is going to be produced in the iberian peninsula we are going to be part potentially of this production is going to be used by the current consumers refiners So the need of transporting or either storing this hydrogen is going to be quite limited. So I think that it's important to have to prepare the future to identify areas, to develop the technical work for that. But I mean, I don't see in the short, mid-term any opportunity to invest in this potential storage. more than what we are doing in small amounts of money in technical terms. Thank you, Anish.

Thank you, Anish. That was our last question. Before we close, please let me take a minute to say goodbye to all of you. After more than 38 years, I'm retiring from Repsol at the end of this month. During this time, I have had the privilege and the honor of witnessing the transformation of Repsol from a myriad of previously state-owned units into a modern multi-energy company committed to being net zero carbon by 2050. Rest assured that both our CEO and our CFO, as well as the rest of the executive team, will continue supporting the IR team, which will now be led by Pablo Vanatine, in their pursuit to provide timely, transparent, and comprehensive information about our business performance. Finally, allow me to express my deepest gratitude to all of you, investors and analysts, buy side and sell side, for your support during this time. We have really enjoyed our stimulating conversations and your thorough questions, which always keep us fresh and challenged. With this farewell note, I would like to bring our second quarter conference call to an end. Thank you very much for your attendance and have a very nice summer.

Ramon, let me, on behalf of the whole Repsol team, thank you, express my gratitude for your relevant and significant contribution to this company and to build the current company we are today. So on behalf of the whole team, Ramon, So have a nice day. Thank you.