Eni Spa Q3 FY2023 Earnings Call

Welcome to Eni's 2023 Third Quarter Results Conference Call hosted by Mr. Francesco Gattei, Chief Financial Officer. For the duration of the call, you will be in listen-only mode. I am now handing you over to your hosts to begin today's conference. Thank you.

Good afternoon and welcome to Eni's third quarter and nine-month 2023 results conference call. Energy markets remain volatile, but at Eni our focus is on delivering results in all scenarios, while at the same time advancing our longer-term strategy. Q3 has seen us successfully achieve both these things. Before digging deeper into the numbers, let me emphasize the key strategic accomplishment of the quarter. We are evolving and strengthening core businesses such as E&P and GGP for the challenge of transitioning energy markets and taking the opportunity to build new relevant businesses such as Plenitude, Enilive, Biochemical, and CCUS. In upstream, in August, we began production from Baleine offshore Ivory Coast less than two years after discovery, further evidence of the efficient integration of world-class exploration with a development strategy focused on time to market and value maximization. Production from Baleine is a contributor to this quarter and year-on-year growth, and its phase ramp-up is an important element in the 3% to 4% growth in our current four-year plan. This approach continues to deliver. We are therefore delighted to significantly exceed our full-year target of 700 million BOE of discovered resources. The recently announced Geng North Discovery offshore Indonesia is assessed by a third-party provider as the largest in the industry in 2023. Indeed, along with Nargis, announced earlier this year, Eni currently has two of the top five. I will revisit Geng in more detail later. Meanwhile, we are also upgrading our upstream portfolio. In September, we announced the sale of our Nigerian onshore production company, NAOC, following the divestment of mature Congo's assets earlier this year. At the same time, we have been advancing our agreed purchase of Neptune, a portfolio that represents an exceptional feat for us. Closing of Neptune remains on track for Q1 2024. Geng and Neptune will be important contributors to the shifting balance of our upstream portfolio towards gas. Obtaining full value from our equity production is, of course, critical, and so we were pleased in the past few days to announce new LNG supply agreements with Congo, Qatar, and Indonesia. We have seen really positive progress as we work to establish a leading CCUS position. Our Bacton UE project was awarded a CO2 appraisal and storage license by the UK government, while we also agreed at the term with the UK for the world's first asset-based regulated CCS business model for our operated high-net project. In energy evolution, we are also very active. Our team met with many of you in September to update on our unique biorefining and agreed-upon strategy. We were also pleased to confirm an agreement to explore the development operation of a new biorefinery in South Korea, supporting the strong global growth target in that business. Moreover, this month we have closed the purchase of Novamont, advancing Versalis' progress in specializing its portfolio towards the growing market of biochemical and bioplastics. And now to group results. Strong segmental EBIT from each of our main businesses results in over €3 billion group EBIT for the quarter, driven by E&P and €11 billion over the nine months. Including associates, the pro forma EBIT of the company in the quarter was €4 billion and €14 billion over the nine months. With a tax rate in the mid-40% consistent with oil price, business performance, and associate contributions. Net income for the quarter was €1.8 billion, resulting in a nine-month net income of €6.6 billion. We continue to have an excellent cash conversion. Underline three quarters cash flow from operation of €3.4 billion and €12.9 billion for the nine months stand out at the top of our historical performance, with an organic free cash flow date of around €6.2 billion, which more than covers our 2023 distribution. We accelerated share buyback this quarter, repurchasing €600 million, meaning we have repurchased over 2% of our shares in the year to end September. And our buyback will continue at an accelerated pace in the fourth quarter. Sharing issues are down almost 6% year-on-year. September also saw the first payment of the €0.94 quarterly dividend. As anticipated, CapEx of €1.9 billion this quarter reflects lower spend than the first half. We have also made the second payment in respect of the PBF joint venture in this quarter. And even as we invest organically and into portfolio and buy back shares, the balance sheet remains in exceptionally good shape, with leverage unchanged from the second quarter at 15% and only up modestly over the last year. Let's now take a look at the business segment performance in the quarter. Taking natural resources first. Upstream production averaged 1.635 million barrels per day, up 4% year on year, with the start-up of Baleine, as I noted, but also higher production in Algeria, ramp-ups in Mexico and Mozambique, recovery in Kazakhstan after last year, and planned outages. Higher production and higher oil prices helped push EBIT to €2.6 billion, up 26% quarter on quarter, and with our upstream satellites, we generated €3.4 billion of adjusted EBIT. GGP had a softer quarter as we said it would. The second half of the year is benefiting from less available portfolio flexibility and could result in fewer optimization opportunities as spreads narrowed. As promised, I want to focus further on our recently announced Geng North discovery in the Kutei Basin offshore Indonesia. It is worth refreshing on the main characteristics of our exploration strategy because Geng North is such a good example. We are focused on gas. We seek a larger equity share that allows us to have greater control of the project and the option of early valorization through our dual-exploration strategy. We explore close to existing infrastructure, which benefits time to market and reduces the development cost and enhances value. Our distinctive power-in house development process helps us optimize time to market, and as a result, not only is Eni consistently the leading global explorer in multiple basins among our peers, but also delivers the best full-cycle returns. In terms of Geng specifically, it is a very significant discovery with 5 TCF of gas and 400 million barrels of condensate in place, equivalent to around a recoverable volume of 800 million barrels of oil equivalent. It is an industry-large discovery year-to-date. Well productivity, confirmed by the DST, is excellent. After completing the Neptune purchase, Eni will have an 88% participation. Development of a field of this scale will require some new infrastructure, including a floating production unit, but this can now be optimized as a new development and include reserves for an additional 5 TCF on our recently acquired IDD acreage. Furthermore, the proximity to infrastructure, the existing Bontang LNG plant, which has available capacity, makes development highly efficient and provides higher value for the gas. Last but not least, it is also worth noting the discovery's further multi-TCF exploration potential in the area. So, by virtue of scale, participation level, efficiency of development, access to market, and cycle time, Geng is a very meaningful addition to Eni's future upstream project pipeline. And now turning to energy evolution. A stronger SERM refining margin and higher refining availability, as we anticipated on our second-quarter call, have combined for a good quarter from traditional refining with EBIT of €328 million, up versus a loss at Q2, down somewhat year-on-year due to scenario effects not fully reflected in the SERM. Similarly, the strengthening scenario, plus better utilization at Venice and Gela and the seasonally normal improvement in marketing, have driven a solid €270 million in EBIT results from Enilive. We were also pleased to have booked our first contribution of positive net income from our biorefinery joint venture with PBF at the Chalmette Refinery in Louisiana, well in advance of our original plan. And as a reminder, income from investment in the downstream is primarily from our stake in the ADNOC Refinery. Versalis continues to be impacted by weak demand, high energy costs, and intense competition in the chemical sector. This emphasizes the importance of the recently completed Novamont acquisition, with our intention to shift towards specialized and sustainable chemistry activities. It is now important to say that Plenitude, even as energy markets continue to be so challenging, is meeting or even exceeding all its operational and financial targets, confirming the strength of a unique and integrated business model. EBIT for Plenitude for the quarter was €180 million, equivalent to €280 million of EBITDA. Along with power, EBIT of €219 million was up 23% year-on-year, despite the significant results from open market power sales in 2022. With a strong contribution from retail and a significant increase in renewable power sold, we now expect Plenitude's 2023 EBITDA to be 30% higher than the original guidance. Start-up offshore wind generation at Dogger Bank and photovoltaic in Kazakhstan emphasized the operational momentum while the deal agreed by GreenIT Plenitude joint venture with CDP to develop four new photovoltaic projects in Italy adds to medium-term progress also. This distinctive growth profile will continue to be a feature of Plenitude as we double 2023 EBITDA by 2026, reaching 7 GW of renewable capacity as well as increasing customers to over 11 million and charging points to over 30,000 by the same date. That leads me to update guidance for 2023. We have narrowed the full-year guidance for oil and gas production to between 1.64 million to 1.66 million barrels of oil equivalent, which at the midpoint implies 2.4% growth year-on-year and a four-quarter exit rate of close to 5% growth year-on-year. We can confirm our GGP guidance in the range of €2.73 billion. We are raising pro forma adjusted downstream EBIT to €1 billion from €0.8 billion, reflecting the stronger third quarter and a better outlook for the last quarter in both traditional biorefining. This is partly offset by continued challenging conditions faced by Versalis. Within downstream, Enilive's pro forma EBITDA is raised to €1 billion from guidance of more than €0.9 previously. As we have highlighted, we are also raising our full-year guidance for Plenitude EBITDA to around €0.9 billion. With this change, we now expect replacement cost CFFO to be around €16.5 billion, up from €15.5 billion previously, and EBIT to be around €14 billion, €2 billion higher than our mid-year view. We are on track to deliver all our original targets despite weaker scenario conditions and planned business outperformance across Eni delivering around €2.6 billion of additional underlying EBIT. Our planned buyback remains at €2.2 billion, and while we continue to expect to complete it by April 2024, we are also accelerating its pace in the final month of 2023. With our dividend of €0.94 per share for 2023, our distribution is equivalent to 33% of expected cash flow from operation. We expect CapEx to be about €9 billion, over 5% lower than our initial plan, with a precise figure determined by the timing around the project activity. This all means we continue to expect leverage in the 10% to 20% range. In conclusion, we continue to deliver excellent operating and financial results and strategic progress. We can reinvest in the business for future value and maintain a resilient financial position in volatile times. Meanwhile, we are also transforming, building on our strengths, and developing new lines of business as opportunities present themselves. This concludes my prepared remarks, and together with Eni's top management, I am ready to answer your questions.

The first question comes from Giacomo Romeo of Jefferies.

Yes, good afternoon. Thank you for giving me this opportunity. First question is around your shares buyback program. Francesco, you hinted at the fact that you are accelerating in Q4 the pace of the buyback. At the current pace, it indicates that you should reach around €2 billion by the end of the year. I just wanted to check whether when you think that the €2.2 billion will be completed, is it going to be Q4 results in February? And also, how should we think about how you will use the flexibility given by the €3.5 billion mandate from the AGM in order to bridge the period when you finish the €2.2 billion and the next AGM in May? The second question is on GGP. You left EBIT guidance unchanged. Year-to-date, you're basically €100 million from the lower end of this. Just trying to understand where the cautious outlook is coming from here. Is it related to the increased tensions in the Middle East? Is there any sort of visibility on potential negative impacts from contract negotiations next year, in the next quarter? Just if you can share some color, that would be helpful. Thank you.

Thank you. I will reply to the share buyback while I will leave the floor to Cristian Signoretto for the GGP guidance. About the share buyback, first of all, you know that we have, as you mentioned, currently the €2.2 billion as a target and the flexibility up to €3.5 billion subject clearly to the improvement towards our cash flow from operation expectations. So that flexibility will be optional in case we see an improvement above the €17 billion threshold that, under the current assumption, we have not yet achieved. In the quarter, you mentioned that it will close according to your estimate around the €2 billion. I think that under the current estimate so far, the past pace is €60 million per week of buying back. This is a bit higher. So I would say that clearly you will see in the coming weeks from the report that we published substantially at the beginning of each week, the increase of the pace. The expectation is to accelerate the buyback. It means that instead of concluding that within April, we will think to have an acceleration. I do not disclose what it will be, but you will see the figure in the acquisition in the time that we will publish every week. Then now I leave to Cristian for more color on GGP guidance.

Yeah, so thank you. So the third-quarter results were in line with the expectations as gathered in the last conference call. And you know the mild market actually guided us to that kind of guidance. When it comes to the fourth quarter and the range in the fourth quarter that we left unchanged, this is actually a result of the scenario uncertainties in terms of volatility, spreads, supply availability, as well as the expected outcome of an ongoing arbitration, which is going to be ruled in the next quarter.

Thank you.

The next question is from Biraj Borkhataria of RBC.

Hi. Thanks for taking my questions. The first one was on exploration. Very helpful slide that you put in today. Obviously, this is probably the way Eni has created the most value over the last decade and clearly a strength of the company. So I was wondering how you're thinking about your exploration budget going forward and into the next couple of years. You see your US peers buying upstream resources in quite a big way, and clearly the oil and gas demand is evolving. Do you think your exploration budget is appropriate as it currently stands, or should you be doing more? And the second question is on Egypt. You have a big position there. I just wanted to get some thoughts from the ground because energy exports there have been minimal, which is kind of normal for the summer, but also we're not seeing much in terms of exports for October either. So I was wondering if you'd comment on, you know, production levels of projects like Azure and the broader situation there. And then finally, just a quick one on the Indonesia discoveries. Is it fair to assume the target will be for these to feed the Bontang LNG and then assuming there's capacity there for more exports, right? Thank you.

Thank you, Biraj. First of all, about exploration; just to have you know we continue to perform. We perform through a budget that we maintain, probably let's say in a steady way, not standing in industry that are substantially reduced to this kind of activity because we have also selected the capacity and the opportunity near field and we have been able also clearly to take advantage of our internal skills and the capability to process our supercomputer seismic imaging and therefore to mitigate the risk of this activity. I will leave it to Guido to answer about additional color on the exploration clearly including Indonesia's plan for valorization and the Egypt Zohr production.

Yeah, on exploration, we may say that we have a very balanced and disciplined budget. As you know, we basically allocate money on ILX and near-field opportunities, and a minor component to the high-impact well. And this was the strategy of the last seven years which proved to be very solid and which we delivered upon. About Geng, Geng is clearly, it shows the success of our distinctive strategy focusing on gas, focusing on nearby infrastructure availability, reinforcing our equity position in a very strategic area, and also supporting our dual-exploration model and fast-track development. So Geng, it includes all these features. As you may have appreciated in the slide, we have quite a significant amount of resources discovered, but also a significant exploration upside, which would allow us on one hand to extend and expand the plateau of the current floating production unit in the southern area, but will also allow to build a new hub in the north area where we have a significant upside potential in the exploration which could extend significantly the plateau. In front of us, there is an LNG plant, Bontang, with a capacity of 22 million tons per year, which is, I would say, almost empty. At the moment, the capacity utilized is 5.6 million tons per year, so we will have plenty of capacity to accommodate the plateau production coming from the Geng Discovery and the stranded assets which we bought from IDD both in the north and in the southern area. I would also underline that this discovery is very liquid-rich, and this helps also a lot to enhance the value of the asset. As far as Zohr, Zohr is producing from 2.1 to 2.2 BCF per day. Now we are and it's in line with our plans; we are now running a number of projects and activities, drilling activities in filling specifically, but also other plateau extension activities to enhance the capacity of the facility to handle the current level of production of Zohr.

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

We are not having issues with the currency because our contracts are in dollars, so we don't have any impact from the devaluation of the currency. Okay. Thank you.

The next question is from Oswald Clint of Bernstein.

Yes, good afternoon. Thank you. I'd like to go back to Indonesia just to get a little bit more detail. It's clearly a massive discovery. I was curious when you'll go after this multi-TCF upside. Can you get this into a 2024 exploration drilling plan where we can look at that? Is there any chance of any of the missing acreage blocks on your map that seem to extend away from this current discovery? Is there any licensing rounds coming up that you might participate in, and would you run this at 88% equity or I think Francesco talked about valorizing it at some point? Is that a couple of years down the line? That's the first question. Secondly, as we think about new developments in places like Indonesia, your friend Mr. Puliti at Oil and Money this year was saying he had to say no to a new FPSO job for a top client, talking about a lack of people, lack of supply chain pressure. So I don't know if that was you, but it feeds into the view the supply chain is tightening up rather quickly. So I wanted to ask about the pressures you're experiencing and ultimately just how robust that 3% to 4% volume growth is in the four-year plan. Thank you.

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

Now, clearly, the pick-up of the activity, both traditional and green, is putting pressure on contractors, both in terms of capacity and ability to deliver activity, but also in terms of cost inflation. We know that from 2021 to 2022, there was an increase of 10% of costs overall, 7% from 2022 to 2023, and we expect 4% year-on-year in the following year. So this clearly is factored into our CapEx estimation. The quality of the Geng asset is such that we expect a very competitive unit cost per development. In terms of further exploration, I would, in the surrounding area, leave the floor to Aldo to give more color.

Yes, thank you, Guido. Yes, we are defining the plans for next year and future years in terms of further drilling in the area of the Kutei Basin. Maybe you have noticed that we have already actually pursued a strategy in the acquisition of acreage in the area. So we have recently, just a few months ago, actually had the award of another block in the area, so the Peri Mahakam. And as already explained, we have increased our shares in all other blocks where we believe there's a good potential. So we have not yet defined in detail our plans for future drilling, but certainly this will be a focus area.

You had also a question, sorry, on the confidence of the plant growth for production of 3% to 4%. This clearly we have a strong pipeline of projects namely Baleine in Ivory Coast, Congo LNG, A&E structure in Libya, and last but not least this Geng plus Mozambique and other significant projects from other affiliates and our satellites in Angola, a new gas project, and a global development and from Var, Johan Castberg and Balder X. So with this pipeline of projects, most of them already sanctioned in the plan and in execution, we are very confident to deliver this planned growth.

Very clear. Thank you.

The next question comes from Alessandro Pozzi of Mediobanca.

Hi. Good afternoon. Thank you for taking my questions. The first one is on SSE, a carbon capture asset. I believe recently you announced a new agreement with the UK regarding high-net, and you secured the first asset-based regulated model. I was wondering if you could give us a bit more color on the economics and what are the pros versus a more traditional model. The second question is on GGP. I believe you contracted a fairly large amount of new volumes on the LNG. You have a target of 18 million tons per annum by 2026. And I believe that you are basically pretty much there with the new volumes. I was wondering whether you could see an upside basically to the long-term guidance there. And the final one, if I may, on North Geng, you talked about a lot of potential upside in terms of discoveries. I was wondering, will you be in a position to finalize the size of the next, the second floating production unit and whether potentially that has the capacity of doubling the current production in the country? Thank you.

Thank you, Alessandro. Two questions are for Guido, and the last one related to GGP is for Cristian.

Yeah, you're absolutely right; we have agreed with the UK authorities on the main economic model terms, however the final stage to assign the definitive economic license is still ongoing, and we are planning to complete this process by the second quarter of 2024 in order to have a cluster FID which includes also the emitter by the quarter three of 2024. The pricing is clearly and the economic model is based on a regulated asset-based model which is still, as I said, under finalization with the regulator. And it will include also some mitigation mechanisms to reduce the risk related to this first-of-a-kind project.

So basically, it is a return on the CapEx that you spend on the project?

Yeah, basically it is the mechanism, the model.

Yeah, so on the LNG supply contracted portfolio, as you said, we have advanced substantially with these last three agreements that we've signed. We are now around 13 million tonnes of contracted capacity. We want to achieve the 18 million tonnes by 2026. And sure, I mean, I think the big evolution on the Geng North discovery will give us some upsides on the target that clearly we are going to take into consideration when we draw the next plan.

As far as the size of the potential North Hub, of course, it is still premature to say, but for the size of the current discovery and the asset and the knowledge we have of the asset, we are planning something which is between 800 million standard cubic feet per day to 1 BCF per day with also a significant liquid production between 50,000 to 60,000 barrels per day. This is from the knowledge, information, and data we have today. Of course, we are still assessing the discovery.

Okay, so it's doubling basically, more than doubling the production from Indonesia at the moment?

More than doubling our production from Indonesia. As you know, the southern area hub asset, Jangkrik, has a capacity; it is producing 700 million standard cubic feet per day currently, and with the other asset discovered, which we will tie in as soon as the other asset would decline, we will maintain for longer this plateau. Yes, so we are almost more than doubling the production.

Very interesting. Thank you. And I guess FID probably sometime next year?

Yeah, this is the plan of course. Many moving parts, stakeholder engagement, final assessment, appraising of the discovery, but this is the target.

The next question comes from Irene Himona of Societe Generale.

Thank you very much. My first question is also on Indonesia, please, and congratulations on this substantial find. If you could perhaps give us a sense, with the knowledge that you have now, a sense of timing for this startup, and then is there enough uncommitted CapEx in the four-year plan to develop it with unchanged CapEx? That's the first question. The second one on Venezuela. What does it mean for Eni exactly that the US has lifted sanctions at least for a few months? Thank you.

In terms of CapEx, clearly we are working on the four-year plan with all the changes that we are discussing, the sanctioning, the evolution of the portfolio, the new discovery that clearly has a high rating or ranking in our plan because of the clear advantage of these volumes in terms of value and cost. So I think you shouldn't expect major increases. There is flexibility, as you mentioned. The commitments generally are clearly more focused on the first year than there are a declining firm commitment in CapEx along the plan, so there is space room for accommodating new initiatives. On Venezuela, Venezuela clearly is now an opportunity. We are still evaluating the options in terms of creating an additional stream to recover our exposure. So far this year we can say we are relatively satisfied with the capability to keep our exposure under control. Obviously, the opportunity of having more volumes and higher production from the country should help to increase also the number of liftings. I don't know if Guido would add something more on the Indonesia start-up and Venezuela activity.

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

Thank you very much.

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

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

Yeah, sure, so the current shut off of the Tamar field clearly has an impact on the balance of the overall region because, as you know, I'm in Egypt; and it's still importing gas from Israel, and this has reduced the amount of gas available for export. On the other extent, though, now consumption in the country is decreasing substantially due to the normal seasonal effect. So I think we will see exports resuming once this effect is notable. When it comes to the impact on GGP, the range that we gave for the guidance actually includes already the uncertainty on the supply from Egypt. So I would say the guidance is resilient to that impact.

About debt, I think that we are in a very favorable position as 80% of our debt is fixed rate and clearly we benefit from instead from the increase of rates and returns related to our larger liquidity. Just to give you a figure that I think is quite interesting; last year, the net cost of our debt, so including the financial cost and the cash or the benefit from our financial asset was 2.3%. This year it is 0.8%. So the increase in the interest rate is benefiting more proportionally our balance sheet, and therefore we are exposed to this trend, which will reduce, at the end, our overall net cost.

Thank you.

The next question is from Henri Patricot of UBS.

Yes, everyone. Thank you for the presentation. I have two questions, please. The first one on the guidance for 2023 for EBIT raised to €14 billion for the year. I mean, if I look at the implied EBIT for the fourth quarter, it looks pretty close to the EBIT you generated in the third quarter, despite what seems to be more positive macro assumptions for the rest of this year. So I was wondering whether there are other factors that would be negative for EBIT and offset this better macro environment in the fourth quarter. And secondly, I want to come back to Enilive and the performance. So considering the guidance going up for the year, looking just at the third quarter year-on-year, there's a bit of a decline here. So I was hoping you could expand on the moving part that you see in this business, whether you're seeing the performance on both sides; whether there is more pressure on the marketing business. Interested in any details here? Thank you.

I have missed the second question. On the first one, you have to consider that our businesses are not, let's say, subject to seasonal fluctuations, so therefore you cannot extrapolate a linearity between the various segments. So there could be clearly more linear performance in the upstream, but GGP, retail, and marketing are all clearly following the different seasons. The difference or the main, let's say, variable part between the third and fourth quarter is that you have a lower contribution from the refining and from the marketing and downstream marketing. There is clearly, as we mentioned, a relatively mild change in the GGP. All the rest are relatively steady. In terms of the market of biofuel, I leave the floor to Stefano Ballista.

Yes, the third-quarter results for Enilive have been robust. We got to €271 million. There is a reduction compared to last year's third quarter. It's related to the marketing business. And the reason is twofold. Last year we experienced one of the highest historical margins on retail. This year, year-on-year, we are experiencing on marketing retail a competitive pressure that actually rose together with the rising of the oil prices. On the other side, we got extra results on wholesale activities, still on marketing. And this is thanks to a new strategy focused on an optimal trade-off between volume and margin. This started at the beginning of the year. If we look at the global figures of the first nine months, we are getting to a plus 9% compared to the nine months of last year. We landed at €611 million of EBIT. This is due to this wholesale strategy and also given the optimal performance of the bio business. Given these figures, we see an EBITDA guideline increase to around €1 billion at the end of the year.

Helpful. Thank you.

The next question is from Henry Tarr of Berenberg.

Hi, guys, and thanks for taking my questions. Two, if I can. One, I think you mentioned an arbitration in GGP potentially coming in Q4. Could you give any color on the potential materiality or what that relates to? That would be helpful. And then just secondly, on Versalis. Clearly, the Novamont acquisition gives an indication as to the aim for that unit. Is there anything else that can be done on a medium-term view to improve profitability there and how do you see margins moving as we look into Q4 and 2024? Thank you.

So two questions, the first for Cristian, and the second for Adriano Alfani, who is the head of Versalis.

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

Okay, thanks.

About Versalis and the Novamont acquisition. Clearly, the Novamont acquisition was a major step into bio or green chemistry that in the whole portfolio Versalis was pretty small. Clearly, now the main effort is to integrate this portfolio and to generate a complementary approach in terms of channel to market and so to complement the portfolio products, but also the portfolio in terms of market participation. So to enhance and get the most of the synergy we can get. So we expect it to significantly grow the Novamont portfolio, but at the same time, the portfolio of Versalis. As we said last time, we expect that in the next few years we should shift around 15% of our portfolio to specialize in green chemistry, including, of course, within green chemistry circularity. The situation in terms of the chemistry industry is pretty challenging. We don't expect significant improvement in Q4, also because Q4 is a low season for some markets like construction, especially for the winter, although the winter is pretty mild, but we don't expect any significant improvement in Q4 from a profitability point, so pretty much in line with Q3.

Okay, thanks.

The next question comes from Massimo Bonisoli of Equita.

Good afternoon. Two questions. The first on Plenitude. How many clients do you expect to gain from the forthcoming liberalization process in the Italian regulated market and what would be the margin gap for the new clients compared to your current average client? Second question on LNG. Following the long-term supply agreements with Qatar and Indonesia. Now do you plan to secure some of the volumes with the end customers for gas uptake or would you like to keep those volumes for the spot market? Thank you.

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

Massimo, thank you for your question. First of all, we are following closely the process of the liberalization because we still had a lot of rumors around, but no clear picture yet set. We will participate in the bidding. It's still early to see whether our bidding will be very successful or not. Of course, we will play our game there. And in terms of margin squeeze, let's see what the rule of the game will be set at the end with the regulation in place. Then we will decide how to participate and what to do exactly.

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

The final question is from Alejandro Vigil of Santander.

Thank you for taking my questions. I have two questions about Plenitude. One is about the performance of the retail business in the third quarter. Has it been very strong? Can it be extrapolated for the next quarters, this performance? And the second question is if you can give us any color about the process of looking for new partners for this business? Thank you.

About the process of sales, I will leave it to Stefano for the question on the performance of the third quarter. The process of sale is continuing. The discussions are continuing with a lot of details, a lot of let's say negotiation and paperwork to be completed, but I confirm that we are proceeding. We don't see so far any major hurdles towards the conclusion. Then I leave to Stefano.

Thank you, Alejandro, for the question. Of course, the quarter was a very good quarter, €284 million the EBITDA that we recorded this quarter, mainly coming from our retail activity. We have been working on the overall international European platform on managing the exposure. We have been working a lot on also defending our activity in Italy by working on the client base and also offering what we call added value services. So of course, these results are not one-off and are repeatable. That's why we also increased our guidance to year-end to €900 million of EBITDA.

Thank you very much.

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

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