Ladies and gentlemen, and welcome to Eni's Third Quarter Results Conference call hosted by Mr. Massimo Mondazzi, Chief Financial Officer. For the duration of the call you will be on listen-only. However at the end of the call you will have the opportunity to ask questions. [Operator Instructions] I'll now hand you over to your host to begin today's conference. Thank you.

So good afternoon and welcome to Eni's nine months results. Before turning to our results I would like to highlight Eni's new mission, we are determined to contribute to the achievement of the UN Sustainable Development Goals and bring about just energy transition. The new mission is the foundation of the company's business model, which focuses on long-term includes the development for our company and its close countries, considering all the sustainable development goals. In line with this mission we've already taken a number of commitments over the medium and long term including zero net carbon emissions for the upstream by 2030. At the next strategy presentation beginning of 2020, we will provide a further update on our targets and energy transition path. And now, the results, in the first nine months of 2019, we continue to consolidate our strategy and announce our cash generation. We generated €9.4 billion of operating cash flow, 5% growth versus 2018 notwithstanding the lower oil and gas scenario. With CapEx at €5.6 billion, we generated underlying organic free cash flow before working capital of €3.8 billion, which more than covers the full year dividend and buyback. Leverage was 25% at the end of September following the closing acquisition of 20% stake in ADNOC Refining and the payment of the interim dividend in the quarter. In 2019, share buyback continuous with purchases for two-third of the planned 400 million target already completed. Upstream production increased to 1.85 million barrel, up 2% the same price and parameter. Thanks to our start-ups in Algeria, Egypt, Norway, the new field in Mexico and the ramp up of Zohr. Exploration continues to create new opportunities for future developments. During the nine months we discovered 650 million BOE of equity resources at the special cost of $1.1 per barrel. In…

Ladies and gentlemen, we will now begin the question-and-answer session. One moment for the first question please. The first question is from Mr. Alessandro Pozzi of Mediobanca.

Good morning, all. The first question is on the INM, I believe the new guidance includes a contribution from ADNOC. I was wondering if you can maybe talk about how much you have there for ADNOC? The second one, I believe the DDNA rent will be operating in line in Q3. I was wondering even O&M cut down on adjusted basis if that is the right number to use going forward. That's it for me.

Okay, so I confirmed that in the guidance we are already including the first ADNOC that it is expected in the range of €50 million. And as far as DDNA our DDNA in the range of $10, $11 per barrel, and we expect this number remain steady in the future.

On ADNOC the $50 million is mainly in Q4, I guess.

Yes, yes.

Thank you.

The next question is from Biraj Borkhataria of Royal Bank of Canada. Please go ahead.

Hi. Thanks for taking my questions. Just wanted to clarify on your cash flow guidance. Did you say that, the mark-to-market for European gas prices we should take €800 million off the €12.8 billion cash flow guidance? That'll be the first question just a bit clarity on that. And then on Vår Energi, could you say anything about the CapEx associated with the new assets acquired I think previously you've talked about €8 billion spend over a five year period for the previous portfolio but what are the new assets add? Thank you.

Okay, so I don't have the breakdown, talking about the CapEx of Vår Energi I don't have the breakdown per asset, but what we expect 100% is an expenditure in the range of $7 billion to develop the final stage of Youngcaster, Balaris [ph] and Grand. So this is the order of magnitude. And in terms of cash flow from operation guidance, yes, I said that the €12.8 billion was based on the budget scenario and the current scenario is more or less in line as far as the oil, while the gas mainly the European gas. So talking about the PSV and TTF, as well as the MVP is much lower, as you have seen from the numbers, and we expect that using the current scenario, we're going to lose €800 million out of the cash flow from operation. So, all-in-all, today with the current scenario, we expect as a cash flow from operation something in the range of €12 billion slightly lower than €12 billion.

Thanks. Very clear. Just a quick follow up on the CapEx so that €7 billion is that on the same period that you showed on the slide upto 2023?

Yes, €7 billion 2023.

Thank you.

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

Thank you. Good morning Massimo. Just first one to clarify if you can, please, you mentioned the ADNOC contribution this year is €50 million. Would that be the dividend you expect or share of net income as an active affiliate? And secondly on Vår Energi is there some guidance you can provide on full year 2018 dividend receipt please? Thank you.

Okay. As far as the Vår Energi dividend received in 2019, so in 2019 Vår Energi distributed $1.7 billion, so 70% is our share. And as far as the ADNOC contribution I said €50 million mainly in the fourth quarter, but due to the fact that the overall result is expected to be negative for ADNOC Refining this year, because of the restart of the FCC that took place this year. Definitely there will be no dividend that remain expected starting from 2020.

Thank you.

The next question is from Jason Gamel of Jefferies. Please go ahead.

Thanks very much. Good morning, Massimo. I also have questions on Vår Energi I believe that the excellent transaction was fully funded with that please correct me if I'm wrong on that. So can you talk a little bit about what the balance sheet leverage now looks like for Vår anything related to net debt to capital or the debt relative to cash from operations? And then the second question, are you able to speak to who retain the abandonment liability of the Exxon assets on that transaction? Thank you.

So in terms of liability, I would say the amount of liability is not a big number and there's not a big issue on the evaluation. If I remember correctly, we expect to start to spend material amount of money from 2033 on. So definitely in the next 10 years, we don't have any kind of significant material expenditure in our other screen. And the other question was about the Vår, I don't have with me the detailed balance sheet structure, but definitely I can confirm that the acquisition is fully funded by the company throughout an ABL [ph]. So, I would say more than -- if it could help you more than measuring the effect in terms of balance sheet definitely should be measured -- the amount of debt should be measured on the relevance of the reserves underlying the financing that definitely are enough to justify the full finance of the purchase price. But anyway, I’ll let you know the composition of the balance sheet later on.

Okay, thank you, Massimo.

The next question is from Thomas Adolff from Credit Suisse. Please go ahead.

Morning. I've got three questions, please just firstly on Vår as well. Could you perhaps, comment how much Vår contributed to the bottom line in the third quarter, as well as in the first nine months of the year. And once the Exxon deal is completed perhaps since you're doubling the business, you can also comment on what sort of a dividend we can expect from Vår next year. We did see a special dividend in 2019. Secondly, just on Zohr, on a gross basis the 2.7 Bcf per day of production you're seeing at the moment is that the ceiling for the domestic market and what does it take to get you to the 3.2? Do you need to have the Damietta liquefaction facility available for export? And then finally, just a question on the Green Refinery in Gela, 750,000 tons of biodiesel, perhaps you can comment a bit on the potential profitability of this facility because 750,000 is quite substantial if we take nesters profitability, but presumably, you're not processing as much second generation feedstock as nesting. Any color on that would be great. Thank you.

Okay, Thomas. So I’ll give you the answer to the first question, and then I'll leave the room to my colleagues to answer the following one. So, in terms of contribution from Vår Energi to our cash flow in the third quarter, the answer is zero because all the dividend you remember that we -- the way we consolidate such a participation is throughout the equity account. So, cash flow -- to the dividend. So, the contribution of third quarter is zero because we distributed -- the company distributed the full dividend in the first and second quarter and the amount our share in euro we will see that is 540 first quarter and the same amount in the second quarter. In terms of how the Exxon asset acquisition could be, could that be accretive in the dividend distribution in the following year, we expect that the additional contribution could be starting from 2020 in the range of €100 million growing up later on in line with the production growth. And then I leave the floor to Alessandro Puliti to answer maybe together with Cristian Signoretto talking about Damietta to answer the Zohr question. And then I'll leave the floor to Ricci to answer your question about the Green refinery.

Okay, good morning. So current production potential from Zohr is 2.7 Bcf per day and by the end of the year with a completion of the 14th and the 15th producer well, we will reach a potential of around 3 billion standard cubic feet per day in terms of potential. And at the beginning of 2020 we will then be ready to produce even 3.2 billion standard cubic feet per day. This is the situation regarding production capacity from the Zohr field. Then I leave the floor to Cristian.

Well on Damietta I mean I think we’ve said it many times so we are actively engaged with all the parties involved for the government and Naturzi [ph] to get the plant up and running and solve the long standing issues on the arbitration. And to answer your question clearly, I mean, adding Damietta let's say in production would surely let’s say reduce the risk of oversupply in the country, even if, let's say the demand is robust, and the export to neighbor countries as we started, but surely Damietta will reduce that risk

And just to complete the answer about the production, so, the one that has been mentioned by Alessandro is the capacity, up to now we got a contribution in one 100% that has been in the range of 2.3 2.4. And we expect that even in the fourth quarter the production will remain slightly the same because of the oversupply that we see today in the market. We see a growing demand domestically speaking and we see by definition, a positive effect from the Damietta restart that we see surely expect not so long time. And then, I leave the floor to Ricci to answer your question about Gela.

Good morning. We expect a significant contribution by the Green refinery of Gela and because mainly we are seeing an increase in the market over HVO in parallel with the increasing of the obligation due to the RED directive, European RED directive and mainly for the RED II starting from 2021. And just in this weekend in the European government they are discussing for possible further improvement of the obligation of Green fuels in parallel with the ambition to anticipate the carbonization to 2030. So, we expect good market and so, the high production of Gela refinery that is 750 kilo tons per year the feedstock the HVO is the 70%-75% of it that is there is a market.

Thank you. Just can I go back to the first question on Vår, just to clarify the answer you gave. So, as far as the dividend is concerned, you received €1 billion in 2019. What can we expect from Vår Energi in 2020, now that the business is substantially bigger, following the acquisition of Exxon’s assets? Thank you.

So the expectation would be to receive a dividend that should be in the range of 100%, €900 million, €950 million. So 70% of that number is the reasonable expectation in 2020. And as I said especially because of the production increase from Lancaster [ph], the starting up of [Indiscernible], we expect a growing production from 2020 to 2023. So, we see the additional contribution coming from this additional production. We see an increase in such amount of dividends later on.

Thank you.

The next question is from Martijn Rats of Morgan Stanley.

Yeah, good morning. I’ve got two small ones, if I may. In the production guidance there is a reference to Venezuela and you say that some of the uncertainty range of the production guidance is due to some uncertainty in the country. And I was wondering if you could give an update and perhaps some commentary about what you're seeing in Venezuela and anything you can say dissent some light on what the production outlook could be there? And also in the result, there was a reference to a €330 million payment -- one-off payment related to the settlement of an arbitration, I was wondering what that is? And also, whether that number is in the cash flow statement included in the working capital changes that you mentioned, I just want to make sure that we don't collect for it twice.

Yes, the arbitration with this Pascagoula arbitration is a part of the working capital change. And as far as Venezuela, so we guess we said that in our production guidance. We embedded the production in the range of 40,000 Boe per day that correspond more or less to 370-380 standard cubic feet -- million cubic feet per day. Today we are running a bit lower than this so instead of 40, we are 36-37. So that's the reason why we kept the guidance unchanged. In terms of -- so by definition, the revenues today are lower than expected so less than the $300 million per year. And in terms of how much of this revenue are cashed in 2019, we expect to cash in more or less 25% of this number, so very much in line with the expectation we had since the budget time.

Okay thank you.

The final question is from Hussein Malik of JPMorgan. Please go ahead sir.

Hi, so thanks for taking my questions. First of all -- so two please. One, downstream. What are the key drivers that would generate the €260 of EBIT in to Q4 and so mid guidance of around €400. Just around IMO, I mean is Eni's business to adapt to the fuel oil specification requirements, what proportion of Eni's NP production is light, low sulfur, and I guess the question is how material could that benefit be if IMO widens the light heavy crude spreads? And the second is -- questions around your buyback framework. Beyond the €400 million commitment for '19, how do you think about the leverage of oil price thresholds for you to realize your €400 million per annum or a $60, $65 Brent, 800 million per annum of Baltics, but just given the volatility sub-60, I'd just like to understand how we should think about the details of the buyback outlook and in periods before it's the low-60. Thank you.

Okay, so I give you the answer about the buyback and then I'll leave the floor to Ricci to answer your question about the expectation, about the 4th quarter result in M&M. So you remember correctly that we will link our buyback to the level of Brent as well as the leverage. So now, end of September our leverage is in the range of 25%, because of the peak of the [indiscernible], I mentioned the 20% stake in ADNOC Refining payment as well as the interim dividend payment that took place in September. So the expectation would be to see a reduction in such leverage by year-end, by definition and we see the leverage back in the range of 20% in the coming quarters. So as we said that the buyback policy was based on the steady expectation forward about the buyback, I would say nothing changed versus the moment in which we launched the buyback. So we feel confident that the leverage would be in the money in term of buyback. In term of oil price we will be more precise when we present the strategy presentation, could be second half of February 2020. But probably if you see the forward curve today, you will have an indication about what the oil price we assume would be. So by definition higher than today, speaking with today's numbers higher than $60 per barrel. And then I leave the follow to Giuseppe Ricci [ph]

Now about the IMO regulation and now we are seeing the fact on the spread. In fact the spread between the low sulfur fuel oil and now we are seeing the effect on the spread. In fact the spread between the law suit and higher suit for fuel oil is increasing, is reaching $150. So that is a very, very significant if significative spread. Us for the Gaz Oil, fuel oil, the difference is continuously now more than $300 per tons. With this spread, it is mandatory to produce law suit for fuel oil and in our system with the contribution of Taranto refinery, that produced a low sulfur fuel oil and the contribution of Milazzo refinery with the defining [ph] that produced low sulfur fuel oil and the coming -- restarting of the EST in Santa Zaro [ph] recovered all the conversion to the sulfur fuel oil or zero high sulfur fuel oil. In the fourth quarter, we expect to complete the new arrangement for the production over the 0.5% sulfur fuel oil and for the distribution on the market today of the new product. And the result of the refining system in the fourth quarter is expected more or less in breakeven or slightly positive.

Very good. Thank you.

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

Good afternoon, two questions left. You had the stronger results in marketing at an NPV zone, if you can give us some color on that performance considering the flat volumes in retail. The second question you mentioned at the beginning of the presentation, the new mission of ENI on sustainability and energy transition. I don't want to spoil your new strategy presentation but should we expect some size of real increase in CapEx from the €33 billion you announced in March this year for the four-year plan?

Okay, so I leave the floor to Ricci to answer your question about the marketing and [Multiple Speakers].

All right. About the marketing the good results are €450 million, not €550 million, it's €450 million. Very, very good driven by the retail, both Italian and abroad retail, and mainly drived in the summer season, due to many factors. First of all we have boost the sale of our premium product and it is a plaster that include that 15% of HVO and we have an increase of the sale compared with the past year of more than 30%. And the second we are adding to the service station, a lot of services, non-oil, that are contributing to the overall rise of the margin, maintaining in all period very good and the overall combination of these factors boosted the result.

Thanks. So in terms mission, I would say, you said that you don't want to spoil but in summary, I think it will be fair saying that in in February-March when we are going to present a new mission, you will see clear idea about how to get -- how to reach the transition complying with the mission target. So clear idea about how to get there, but I will say no capital increase as far as the next four years program.

Good, thank you.

Mr. Mondazzi there are no more questions registered sir.

Okay, thank you very much, everyone. Bye-bye.