Good afternoon, ladies and gentlemen, and welcome to Eni's 2018 Third Quarter Results Conference Call, hosted by Massimo Mantovani, Chief Financial Officer. [Operator Instructions]. I will now hand you over to your host to begin today's conference. Thank you.

Good afternoon, and welcome to the nine months result presentation. During 2018, we've continued to grow and strengthen our business model, accelerating cash generation. But let's see more in detail. In upstream, production was 1,844,000 boe per day, up 3% compared to the same period of 2017, or 4%, if we take into account PSA price effects. We expect further growing volumes in the last quarter. Moreover, we will continue to proceed towards the FIDs as we've planned, in particular, for Mexico Area 1, where we're already obtained approval of the development plan, while we'll progress also within Phase II in Congo, in Italy and Merakes in Indonesia. In exploration, we continue to expand our portfolio by acreage, in particular, with the announced during October in Libya and Mozambique. Another important driver of our growth is Gas & Power, which in this quarter has maintained a positive result bringing operating profit from the beginning of the year over €500 million. In this business, we're going to further improve our yearly guidance. Finally, our refining and chemical results, while over the last year, confirm that the new industrial structure allows greater resilience to fluctuation in oil prices. Cash flow from operation before working capital in the nine months amounted to €9.4 billion, recording the strong acceleration in the last quarter in which we achieved €3.4 billion. In the first nine months, free cash generation before net disposal of the period amounted to €4.3 billion, well in excess of the full year dividend. Our net debt is declining, as well our leverage that is now at [indiscernible] at the expected to contract further by the end of this year. Upstream is speeding up in terms of economic results and cash generation. In the first nine months of 2018, we recorded a 4%…

[Operator Instructions]. The first question comes from Adolff Thomas with Crédit Suisse.

I have three question, if I may, and congratulations on the strong 3Q results. A lot of good things happening in Egypt at the moment, so I wanted to focus my questions on Egypt. Firstly, you mentioned you've obtained a 10-year extension of the Great Nooros Area, which is great. But perhaps since production there has often surprised positively on the upside, can you perhaps talk about the profile we should expect for Nooros and the remaining prospectivity of the license area? And secondly, on Zohr, the ramp-up is performing better than expected. I wonder whether you can comment on how the reservoirs behaving so far? And whether the previous or the current target could be raised? And then finally, on Egypt as well. I wanted to know if you spotted the Noor prospect. And if you are happy to share with us the predrilled thesis estimate for this as well?

I will leave the floor to Antonio and Alessandra to answer your questions about Egypt.

Okay. Concerning the Nooros, I think, we are - as you know that we are producing stable 1.2 billion scf per day within synergy with Abu Dhabi facilities. We have already launched a pipeline connecting the Abu Dhabi facilities with alkynyl in the cost, because we've spare capacity. This will allow us to continue exploring Nooros for the future, possibly expanding the production. But in addition, the pipeline we're going to connect Baltim West, which left already a lot of exploration to be done. And this is the large prospectivity which imply an extension of 10 years for that part of the development area in Nile delta. On Zohr, we're progressing our plan in anticipation with 3 and 5, which is going to be upstream in March. Then we will continue 6 and 7 between June and September to reach the POD value with an upside of additional 1 billion scf, which is going to give us the opportunity to produce 3.2 billion scf per day within next - Concerning the reservoir, I leave the floor to Alessandro to tell you exactly how it's produce the reservoir of Zohr.

Okay. Good morning. Reservoir of Zohr is currently delivering extremely good performance. Pressure depression is detectable. And certainly reservoir performance, they will sustain the increase of plateau, just mentioned by Antonio. So we'll target to achieve by end of 2019 a target of 3.2 Bcf per day of production.

Okay. Maybe look and answer the Noor question.

On Noor, we start drilling the well at the end of September. So we're at an early stage. What I can share is that Noor is a sizable prospect, and this is our expectation for the while.

The next question comes from Alastair Syme with Citi.

Just a couple of some outlook questions. I think you previously talked about the LNG markets as you looked to market Mozambique. I think you said earlier in this year that you're not looking to take equity and the LNG market and probably not support more than a 12% I just wonder if you consider update us some accounts state of the LNG market as you market that cash? And secondly, can you just talk a little bit about the MOU you signed with Pertamina? What's your intention? And what's the criteria will you use on

I will leave Massimo Mantovani answering your question about the LNG market outlook.

Alastair, it was a great year for LNG, and it was an unbelievable very great quarter. If we consider that to the JKM pricing in August was $10.5, and which is even higher than actually what we expect in November. And on the other hand, for the LNG market, we also have to consider that most of the contracts are oil based. And in terms of what we buy, which is good for our upstream side. And of course, for us it is a little bit less good. But on the other hand, what was clear and important for us is that Eni makes a profit. In terms of Mozambique, the discussion which has been taken with our partners is in respect of actually going and taking marketing out of the for taking the final investment decision, and this is still the status, and we're still all targeting for a final investment decision to be taken in 2019. And we do believe that gas would be important to be at portfolio for LNG. I'd like to mention that this year we will sell and - about 7.5 million tons as compared to 5 million tons of last year. And what is more importantly and was also mentioned by Massimo before, is that we had an increase on the quarter, which is coming from our own equity, which is more than 50% this year as compared to about 30% last year. And that as we also said in the - a full year plan is going to go. We are targeting a portfolio which is sizable enough to take all the opportunity. And in the contractor at the end of this year will be already 9 million tons. And so we're more than in line than what we envision in the plan, which was about a 12 million tons by 2021. So we are increasing more than that.

Okay. So about that - referring to the MOU that is being signed about the Chemicals business, this is an MOU aiming at expanding the ratios between the two companies. So the main target for the time being is to explore the wide array of potentially opportunity across the entire value chain by targeting mainly, as I said, been refining the initiative. We are transforming - We are at the moment the first doing such a transformation the terminal is very well interested in exploring alternatives, such as the one that we're doing in Italy, so that is the main scope of what we signed.

And can you just remind us what sort of returns criteria you're using in downstream investment?

Well, this is - really this is a period of status on this respect, but if I give a look to the expected return from the green refinery right now what we're doing in Italy, in Gela and - definitely the return we expect today is higher than 10%.

Higher than 10?

Yes.

So can I just circle back on the Mozambique. As you market out Mozambique, is it still the intention to put roughly 50% on equity? Is that still the time?

Yes, it is. I mean, at least, that the key shows that - that the Gulf will be taking a better partner for us their respective participation in the project, and so that's equity for us.

The next question comes from Thomas Klein with RBC. Excuse me, the question has been withdrawn. The next question is from Jason Gammel of Jefferies.

Any updated thoughts on the potential for the restart of the Damietta facility in the Egypt? Any progress that's been made there? And second question on the Chemical business. Can you talk a little bit about how you think about the medium-term competitiveness of the polyethylene business? Just given that one of the factors that you decided for the weakness in the quarter was the surging volumes for the U.S., because that looks to only being increasing over the course of the next several quarters?

Okay. Massimo to answer the Damietta question.

Preferring Damietta is not being work in terms of taking out LNG since few years. And now the condition of the market is completely different. Now, we told the production is coming now in Egypt. And not only in Egypt, actually in the future - can also be aggregated from boarding areas. To have a look pretty good in respect of restart of Damietta. And there are ongoing discussions, which are quite advanced. And I think is the interest of all parties the Damietta as soon as possible. It takes about once the agreement is reached something like 3, 4 months to start. But I would be surprised if we don't have Damietta on work next year. Nevertheless, this is the objective of the discussion which are taking place.

So that to the Chemical business, CFO will answer your question about the Chemical business.

Thank you, Jason, for your question. Yes, indeed in the third quarter, the recorder negative affect on the scenario driven by the polyethylene business. But you have to address these negative effects on as the comprehensive combination of events. The rapid increase in the price of NAFTA, a strengthening dollar and relativity lower demand for polyethylene in Europe. And it is quite difficult to project this volatile market of the quarter in the coming months. For sure, as a general trend, we can say that in Europe, it is growing and trend in substituting NAFTA with and they're growing of ethylene from the U.S.A. But at the same time, Europe is still enjoying a very strong demand growth, [indiscernible] in the last 2 to 3 years. And so this growth in demand could rebalance the pressure from rising oil-based feedstocks.

The next question comes from [indiscernible] with Berenberg.

I just had a couple of questions. One was on higher gas realizations, which were a clear driver for the quarter. Whether higher across the board? Or with was a specific regions where you benefited securely? And then secondly, on the Gas & Power business. You obviously increased profit target for the year. Is the bulk of that being driven by LNG? Or are the power generation, midstream, retail and also adding to that change in guidance?

So as far as the gas realization price, I mean, the gas realizations - and definitely the growth that we recorded in this quarter was driven mainly by the new production, new ramp ups in E&P production, such as definitely resolved. Zohr, if you remember, we never disclose exactly the formula, but we already said that the formula is partially linked to the oil price. So today with the oil price at $70, $80 per barrel, definitely we're benefiting from the higher range of the price formula. The same for the new gas production that is coming from Jangkrik. So this is another good example of high price gas that we are increasingly producing worldwide. But let me complete you - correctly, it is not increasing the gas realization price. Let me add also that the - at the same time, the cost we incurred to produce this additional quantity of gas, is really competitive, because technically the most important example is Zohr, that has been developed in a very low scenario in terms of cost, but even Jangkrik benefiting from a very positive scenario. So what we are harvesting right now is the best margin that is the result of high prices and the low cost sustained to develop this gas fleet. As far as the composition of the Gas & Power result, maybe I leave the floor to Massimo Mantovani.

You know the key strategy for this year was two pillars which was the turnaround of the legacy contract and assets. And the integration respect of LNG. And I think that worked pretty well this year. And all line of business, which is in Gas & Power work as well, I mean starting from retail business and I've to mention specifically LNG, LNG was one of the top performer. As I said before, we increased the amount of volumes quite significantly, mostly upstream. Jangkrik was a pretty good source for that, for extra volumes. And considering the price that we are in the market, which are quite exceptional. As I mentioned before referring to and but also in the European gas market, it was a pretty good moment, particular in this quarter.

The next question comes from with Bank of America Merrill Lynch,

Just the first one, turning back to European gas. Can you just remind us on your exposure on two spots versus longer-term turn structure in Europe? And then secondly, your production guidance on - is 3%, up $60. Just given that we're running at about 72 year-to-date. Can you just remind us on the sensitivities of that if you were to run that at the year-to-date numbers?

Okay. I'll give you now the answer to your second question. So the sensitivity is more or less 10,000 boe. So dropping from 72, that is the number - the number at which we're running the full quarter to $60 per barrel that is the level of - which we're giving the guidance. So $12 per barrel means more are less 10,000 boe per day. And maybe I leave the floor to Massimo to answer the question about

You know, we have acquired complex aggregated portfolio from the European gas base, of course, on the contracts of long term with different source. And in terms of sales, something like about between 25% and 30%, in general terms, is actually sold on this spot market. This is also an issue of optimization, which is done constantly. And we also have to consider that in all these, of course, as a way to the logistics that we acquired in the past in respect of the gas business.

The next question comes from Jason Kenney with Santander.

Coming back to - from an earlier question, if I might. The oil and liquids realizations. I'm just trying to take down and see where there were perhaps some regional supports in oil and liquids realizations, particularly looking for Kazakhstan and Italy to see we were above normal. But then maybe also the general trend, I think, in 2016, the discount versus Brent - was 10%; in 2017, it was 8%. On a year-to-date basis it was 7% discount versus Brent. So I'm just wondering what I should be thinking about that trend going into 2019, please?

The most important reason why we reduced the discount versus Brent is the quality of our production. The - if you think about the most important contributor of the new production, such as Jehle - for example, so high-quality of oil, definitely they are contributing significantly to the net price we are going to get from the market. And we do not expect significant changes in this discount overall as far as 2019.

The next question comes from Alessandro Pozzi with Mediobanca.

I have a couple of questions. The first one on Venezuela. You mentioned bit lower production there. I was wondering, if you can maybe give us an update on the situation in Venezuela, also in terms of with [indiscernible]. And going back to the Zohr, previous questions, you mentioned, your targets to increase production to 3.2 Bcf by the end of next year. I was wondering if that is subject to the restart of Damietta or not?

Alessandro, so as far as Venezuela situation remain a critical one, so the reduction in gas taken by - as I said before, is expected to remain in place at least by the end of this year. And we will see the reduction we guess is by the reduction domestic - in domestic market, consumption, together with, I would say, some technical problem that is having in this Power plants, that's now are suffering because maybe they are short of the to have their plant back in production after maintenance. And in term of financial exposure, the news are not so bad, because the level of exposure that we are succeeding to take is quite stable. We are talking about something less than €700 million. We are receiving some payment anyway, notwithstanding the situation. So on this respect, we are in line with the protection we made at the end - at the beginning of this year, when we definitely took into consideration the difficult situation in country. And maybe I can answer also, because it's quite easy - the question about Zohr, no. Definitely, the target of 3.2, definitely it is not related to the restart of Damietta.

The next question comes from Jon Rigby with UBS.

I think both these questions are for Massimo. The first is, when we met in March, you had a slide that talked about the leverage target and share buybacks for excess cash distribution. So I guess, given where your performance was - where the macro is be in that fact scenario, which is now starting to come into view. I think it feels to me that the industry is thinking hard about where it should exit a high cycle conditions in terms of gearing, and balancing gearing versus buyback. So I wondered whether you could just share with us some initial thoughts about that, obviously, early days, but I guess, you'll talk about in 2019. But some sort of thought process around where you wanted to be with respect to your leverage targets? And what you would then leave over for buybacks? The second question is, just on tax rates. We've seen to now be leveling out in the upstream at about 65% of the tax rate, is that a good number to you going forward at these kind of oil price conditions? And then also secondly, your downstream business have actually seen to take quite a high tax charge, I think, about where corporate tax charges are globally. So I just wonder whether may be you can shine a little bit light on that.

So in term of leverage and cash distribution and buyback, Jon, as you said, that may be - the good timing to talk about any decision is would be March - February, March 2019, where we're going to present our new strategy. But definitely, what I could say that, up to now, nothing change in term of aspiration and strategy. So what we said in term of aspiration to maintain progressive dividend together with a buyback, while we perceive a leverage below 20% steadily remain in place. And on this respect, I would say that what is going on, what we are doing in term of performance, in term of implementation of our strategy is running very well. So the cash we're producing is significant. You have seen that the leverage dropped below 20% for the first time in the third quarter. As I said, we expect the leverage be even lower benefiting from the cash we're going to generate in the fourth quarter. So March will be the right time to tell you when and all March, but we are really on the right way to implement what we said on this respect. In terms of tax rate, yes, assuming a $70, $75 Brent scenario, that you know is impacting significantly our tax rate on the upstream business that diffidently is the most important tax contributor in our group. Something in the range of less than $60, something in the range of $55, $58, that would be the right guidance for this year, the full year, and as well as in 2019, while the cash tax rate is expected to remain in the range of 30% as it is in for the first nine months. And in term of tax rate on downstream, let me see the - a 40% tax rate that is a bit higher than the Italian tax rate. I don't have a specific answer in detail. So maybe I'll let you know, Jon. So the tax rate is 40%, why it's higher than 30%, 27%, I'll let you know.

The next question comes from Robert West with Redburn.

First of all, I'd like to ask you is about your long run guidance for the Gas & Power business. I think back in March that was targeting €800 million by 2021. And this year, you effectively coming in at double what you are targeting. You spoke a little bit earlier about having more volumes through the gas business, particularly on LNG. And so my question is, would it be right to assume that, that long run target is moving up with as will? Or should be when you come to revisit it in March? The second question I have is about the - evolution of upstream OpEx. It is on the number that we see in the disclosure? And so I was wondering if you could comment on whether you're managing to keep costs where you wanted to be? Or see anything in that requires to focus and to address inflation coming back?

Okay. In term of Gas & Power, long run, so as Massimo said, definitely mainly in mid-gas the result we're achieving in 2019 is being definitely positively affected by the scenario, scenario that has been really positive on all the sub-businesses included in midstream. So the by spreading power, the gas price, the LNG price in Far East and elsewhere. So we have been surprised, that's the reason why we adjusted twice the guidance because the scenario that we are testifying is definitely higher. So on this respect, we believe that's the adjustment that the scenario, we're assuming, we are going to assume that we project our full year plan would be lower than this, based on normal condition. But at the same time, the result we are achieving 55 that the industrial activities, the progress in term of lower cost, higher margin in term of clients talking about retail is progressing, even a bit faster than expected. So no reason to change the guide today. And as far as 2019, definitely, we will touch base more precisely in March. But definitely, what we could say right now that we are going to project something that would be globally in the range of €400 million to €500 million in terms of EBIT - expected EBIT. In term of upstream, OpEx, now we are - the actual number is in the range of $7 per barrel, and $7 is something that is - that we are confident, and we believe we can take. Also because we're not testifying any significant inflation increase in the market right now. So no sign that the $7 could be higher, for example, in 2019.

The next question comes from Irene Himona with SG.

Massimo, I have three questions, please. Firstly, you mentioned how robust marketing was. I wonder if you can split for us for the third quarter and the nine months, the refining versus marketing EBIT, please. Secondly, working capital. You've been releasing cash for the last couple of quarters. I wonder if you can give us any sort of guidance, an indication for the fourth quarter, expected working capital. And then finally, back to Gas & Power, which obviously surprised positively with the profit. I think I'm right in saying that you say the results - the adjusted results includes €40 million from derivatives. I just wonder if that is correct. If you can share with us the rational for not stripping up the €40 million from adjusted profit?

Okay, Irene. So in term of split between refining and marketing, so - as far as the fourth quarter, we're talking about full result of €140 million, so marketing is €143 million, while refining is more or less [indiscernible] considering that we had a slight recovery in the refining margin in the third quarter. Talking about the nine months, marketing recorded €372 million, while refining was negative €154 million, for a total result of more or less €220 million. We expect marketing performing well even in fourth quarter, even if the fourth quarter is not the strongest in all along the year, as far as marketing. While looking at the margin, we are experiencing as far as refining, in October, we expect a slight loss in the refinery in the fourth quarter. In term of working capital. So we're doing what we promised. So as far as - now the nine months actual, we have said, we fully recovered the €900 million that is being absorbed in the first quarter. And we expect a positive contribution from working capital in the fourth quarter in the range of very few hundreds of millions of euros. In term of derivatives, I can't give you an answer, because I - maybe it requires a bit of time. So Irene, we will be back to you explaining the rational of what you're asking for.

The next question comes from Massimo Bonisoli with Equita.

Two quick questions will ask. Could you give us some color on the starting of exploration and production activities in Libya from the assets recently acquired from And second, do you have any progress in the firm now of the - in Mexico?

So Antonio will give you the answer about the exploration activity in Libya.

Okay. As you know, the included three blocks, A, B and C, which - A and B are in close to Wafa. So that is the main synergy we have seen jointly with BP and NOC. And this is the objective since we have in - in the area of Wafa, and this is can be one of the area which we can kickoff quite quickly. And the rest will be offshore, definitely we should work a little bit more on that.

Okay. Massimo, as far as the out in one in Mexico, we are proceeding in a negotiation phase. We don't expect to cash in any dollar by year-end, I guess. We'll let you know while we are completing the deal.

The next question comes from Lucas Herrmann with Deutsche Bank.

Couple by me. First, just a point of clarification, Massimo. Your statement on the slide on strong cash generation, which shows you've delivered the FFO of €9.8 billion in the first nine months. Does that include the sum that you've received to Zohr, presume it does, but just to make sure? Secondly, I just wanted to ask if you could expand a little bit on the litigation in the U.S. around Regas. What the actual cash outflow on that litigation might be to you? And what the benefit to P&L and cash flow longer term, may be as the Regas obligation isn't there any longer? And thirdly, I'd like to just - on Jangkrik and LNG volumes, to extend your overproducing, that can use that phrase at the present time in Indonesia. And driving more gas through Bontang than perhaps have been planned?

As far as the cash flow, yes. As we wrote in the chart we presented a few minutes ago, Chart number eight. The €9.8 million as well as the €13.5 million, does include the more are less $450 million, we casting as later payment relating to the disposal to Rosneft into of shares in Zohr. And as far as the Bontang and Indonesia, I'll let Antonio will be answering your question.

Yes. So as has been mentioned in the previous call, the spare capacity of our FPU in Jangkrik allow us to produce more because also the reservoir is performing much, much better. Initially, the plateau expected from the reservoir was 450. But since the start up the higher performance allow us to utilize the additional capacity of this - say, the FPU. And today, we are ranging production between €697 million, €700 million scf per day.

And Antonio, what is the due to the reserves basically, obviously, down more rapidly. But are you up in the reserve effectively at the same time? Or are we just seeing the more rapid producing out?

No. We are the - we have recently made all this build up on the reservoir. And we have seen, we have much more reserves. But the expectation is also that Merakes has been designed also to come in on a decline of Jangkrik, which is up to now is not coming up. We are making additional development on Jangkrik and work over, which we'll keep the plateau longer than the expectation.

And then on U.S. Regas, Massimo?

Okay. And as far as the - Regas arbitration outcome, what we have to pay is written even in our financial statement. The amount is €286 million. The amount that we have to pay that is out of the arbitration. We believe is a good as a result, taking consideration the obligation we signed few years ago, when the prospective in terms of the worldwide LNG market, mainly the U.S. was completely different. And this amount has to be paid, I would say, shortly.

And what's the future saving and benefits to Gas & Power that we should expect to see?

No. Say, for the group, more than Gas & Power, I would say, significant savings.

So, what was the significant mean?

I cannot release exactly the number that is based on our internal valuation, but significant means basically not some tens of million but hundreds of million.

Right. But that's not - sorry, if I'm go on. That benefit will be seen in which division?

So the installment up to the arbitration outcome in term of cost where the installment was written in the E&P profit or loss.

The next question comes from Thomas Klein with RBC.

Apologies for earlier. Just following up on the one that your MOU at Pertamina at - Can you talk about more about the pilot list the fuel plan that's being built by Sendai, I believe? Any more detail on what you're trying to do there would be helpful? For instant, how big a scale it could potentially become?

Yes. On the ways of fuel technology, we have to say that, Eni has protected this technology with six registered patterns. And that obtained with this technology can be used to produce an ultra-low sulfur oil, while is compliant with the new IMO regulation. By the end of 2018, the new Gela pilot would be started up, and we are engineering so far plant in - We're also starting other plant at a larger scale, which we expect to have a significant return.

And there were larger plants, they would presumably be at existing Eni refineries sites, which can be considering new ones elsewhere?

Oh. It is something that we have to decide. So we can't give you an answer right now about this.

The next question comes from Lydia Rainforth with Barclays.

I have two, please. The first one was on billion price gas. I'm just [indiscernible] plant restart. Are you happy with the current union gas, gas shareholding? Or would you look at taking that to the 400 and then secondly, on cash flow per barrel in the upstream, is that matter the oil price that you were talking be?

So in term of relationship with - maybe I'll leave the floor to Massimo, and I will give you the answer about the -

Yes, we are happy. We are happy with the current situation. And we are not looking to changes in the moment. And of course, a very project is always a life. But for the timing, we're - And we're working well. We're trying to have the restarted. We're talking with the side. We're actually also some the Damietta, because 20% is on Vegas. And we just have to conclude the discussions will all the partners involved, two of the plants will start as soon as possible. Which is this what is going on.

And about the unit cash flow and E&P, yes, Lydia, what we're getting something slightly better than expected on top of the advantage we are taking from the oil price, so the scenario. So that's the reason why, I said, that we are progressing ahead of schedule in getting the $22 per barrel result to the two project in 2021 - 2021. And to give you more color on this, what I can do is to give you maybe the breakdown of what we're getting after this first nine months in term of cash flow from operations in E&P. So we have seen that the cash flow from operation grew by €3.4 billion in the first nine months versus 2017. And the overall growth is related as far as 70% to the scenario that is definitely being positive as far as the price is slightly negative in terms of exchange rate. And as far as 30%, it means €1 billion is due to factors. So an increasing value of our production, increasing volumes, reduced cost that performance slightly better than what we expected when we performed the budget.

The next question comes from Alvin Thomas with Exane.

Just a couple of quick ones for me. First an update on the list of FID we were looking to achieve by year-end? And the second one is just on Libya. Can you give us an update on the current operations and lifting you were able to achieve there? And may be what your outlook is into year-end?

Maybe I leave the floor to Alessandro for these concern and leave the floor to Antonio.

Okay. The plan at FID from now to the end of the year are - in Italy, Mexico Area 1, and Phase 2b in Congo. And then we are working to bring also FID of miracles Indonesia across the end of the year.

Okay. Concerning the operation, all plans are running quite well. Unfortunately, we would be suffering some reduction on local markets requirements due to power plant failure in country. There is little improvement in those days, but definitely the production of gas is available from our side. Anyway, we'll monitoring the situation of the power plant and hopefully, we're going to go up, again, as previously.

Can I ask what volume you're at currently?

The volume for local market is moving between 19 million to 21 million cubic meters per day, this is the range, normally, they are receiving from the gas produced between Wafa and maleta with a platform.

[Indiscernible] is worth mention that definitely we believe that the domestic consumption is going to recover because we're talking about a few thousand boe equivalent per day in term of lack of demand. But it's worth take into consideration that we always have the possibility to export gas to apply for the export of - case the situation will be worse or last longer-than-expected today. So that's the reason why we are not particularly worry about potential economic impact in the longer term.

The next question comes from Christyan Malek with JPMorgan. Sorry, with Martijn Rats with Morgan Stanley.

I had two that I wanted to ask you. On the last conference call, you may have some comments about buyback depending on the trajectory of the balance sheet. I think sort of build on the question that Jon asked earlier as well. And given that the balance sheet to the during the quarter, can you update us on your thoughts on buybacks? And secondly, I wanted to briefly ask about the credit rating downgrade. My suspicion is this not have a big impact. I mean, it will in fact sovereign. But I was wondering, if you can make some comments about it in terms of if there is anything you can do to address this how important this is -

In terms of buyback and leverage, I've already said that the trajectory, as you said, is positive. So 80% expected to drop further by year-end projecting a price that will in the range of 70, 75 in 2019, means to have a longer good trajectory on this respect. So the execution our strategy is going ahead very well. But as I said, final decision and announcement about even quantities in cash of buyback is postponed to March 2019 And in terms of downgrade, I really believe that we did not deserve this downgrade that you know is due to the strict rule apply by Moody's of the two maximum different between the government-related entities and the sovereign rating. Even more is recognized in this report that we are performing even better-than-expected. So really decision is going to penalize at least in term of info that is being circulated more than we deserve. Anyway, I do not believe that this decision will negatively impact on our financial capability. Our balance sheet is stronger and stronger. So definitely, I'm not worry about this. But anyway, I believe that definitely it's been a wrong decision, and we didn't deserve it. And we're going to talk with them, explaining may be better and better our financial situation, our strong - portfolio with our perspectives, and see if there is possibility to apply the exception that, I believe, could be applied in term of this - strange rule.

The last question comes from Christyan Malek with JPMorgan.

And just as a follow-on from, I guess, my colleague from the house of Morgan. The question on buyback. I think, just because to break it up and do follow-up. To what extent you're getting it is more involved discussions from the Italian government in terms of how we are thinking about your capital frame? Are you seeing in terms of changes how to interact? And to the micromanagement or is this is my imagination? And in terms of the philosophy around buyback, just to be clear around your priorities, can I just to say to assume that this - the trigger - the trigger, but - in terms of M&A, or areas opportunities you would like to take [indiscernible] Would that take priority for any potential buyback as you start to dig or continue to dig into Q1 next year? And then the second question, on - in Egypt, with the - with the new gas law and easing up in terms of this fiscal regimen, as I just talked about, looking to allow you to basically secure full production or full share production. And now, you basically company - high-cost exploration production and with that being able to sell in terms of not being able to sell at a preset price in - electricity. Does that new - regimen shifts apply to all new contracts? And how does that influence? How you think about allocating CapEx to Egypt going forward? I presume it's not retroactive, it's going to be forward-looking on new projects. So I would like to see how that's - have also evolving think about - in terms of allocating more - perhaps less CapEx into Egypt?

No. No effects of this low about our prices and our contracts.

Yes.

As far as buybacks, so - buyback is a priority. So we said that our intonation policy is based on the two legs, the progressing dividend and the buyback. Buyback is linked to the condition - linked to the leverage. As far as this condition will be respected, we will go ahead and performing in the strategy in the remuneration policy that we announced. We also said sometimes, Claudio also mentioned that, any M&A activity that could happen talking about asset and so on will not jeopardize the performance on this respect. So in case both of them would be accommodated. And definitely, and no relationship with what is going on in Italy together with the buyback. Buyback is a decision we are taking. We will take looking at our numbers, our business prospective scenario and so on.

Okay. And on Egypt?

Egypt, I said that, we don't have any impact on this new rule. So the gas price is fixed. And so I do not see any direct effect on our decision, on our current asset or any future decision about the capital allocation. The situation remain as it is and the parameters we take into consideration to evaluate the project will remain the same. So no impact from this new legislation, Christyan.

Okay. So thank you very much, all. See you next time. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.