REPSOL SA (REP) Q1 2026 Earnings Call Transcript

Thank you, Operator. And good morning to everyone joining us today. Welcome to Repsol's first quarter 2026 results presentation. Today's conference call will be hosted by Joshua Yonimath, our chief executive officer, with other members of the executive team joining us as well. At the end of the presentation, we will be available for a Q&A session. Before we begin, let me remind you that during this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated on our disclaimer. With that, I will hand the conference call over to Josu Jono.

Thank you, Pablo. Good morning and welcome to everyone. Last quarter, Mark, a solid start to the first year of our update 2026-2028, the strategic roadmap that we present six weeks ago in March here in Madrid and most of you were present here. uh this strategic roadmap is built on three clear pillars increase cash flow generation higher shareholder returns and discipline capital allocation always preserving the strength of our balance sheet since then since our capital markets today the escalation of the conflict in the middle east has had global implication for our industry increasing volatility across commodities and reinforcing uncertainty around their near-term economic outlook our market environment has since become more complex shifting from concerns about oversupply risk to a very different context of actual physical distractions the closure of key energy routes has led to a significant tightening of oil gas and products markets increasing price fluctuations and reshaping global trade flows in this situation repsol has remained focused on the safe and efficient operation of his assets ensuring continuity of energy supply while taking timely and discipline actions to help mitigate the impact of fuel price volatility to our customers as of today across our assets remain stable and reliable all the operations i mean with material exposure to the middle east we are well positioned to navigate the current environment and benefit from commodity market dynamics all that support by our diversified and resilient portfolio looking at the main developments of the first quarter in the upstream we complete the agreement to incorporate total energy to our uk jb creating the largest independent oil and gas producer on the UK continental shelf. In addition, we continue moving forward with our project pipeline, starting production at LAPA Southwest and reaching the latest stages of development in PICA, Alaska. In Venezuela, the recent updates in the country could provide a material upside within the portfolio. In the industrial side, the performance benefits from the strong refining environment in March, and the increased contribution from trading businesses. Results were partially held back by non-transcended results and time lag effects on products pricing, which are expected to flow through the P&L in coming months, in the next quarter. In customer activity remained resilient, supported by higher mobility sales, and the continued growth of our customer base. In terms of results, first quarter adjusted net income reached 873 million euros, a 57% increase over the same period in 2025, mostly due to a stronger contribution from industrial. Cash flow from operations stood at 1 billion euros, 2% higher than in the first quarter last year, cash generation was impacted by our 1.4 billion euros working capital build-up, mainly related to inventories linked to higher prices and volumes as we ensure full security of supply to a refining system in this complex and volatile environment. Excluding working capital movements, operating cash flow generation amounted to 2.4 billion euros more than covering investments interest and shareholder remuneration in the quarter net debt close at 4.8 billion euros a 0.3 billion increase over december giving rate years to that 14.3 percent and 6.5 percent if we exclude leases shareholder remuneration was aligned with our distribution objectives the first cash dividend of 2026 was paid in january amounting to 0.5 euros per share the second dividend will be paid in july to reach a total dividend of 1.051 euros per share in the full year and thus this figure is roughly speaking an eight percent increase compared to 2025. dividends will be complemented to be shared by bucks to reach our committed 30 to 40 percent cash flow from operation distribution objective. And aligned with this, the first buyback program of 2026 was launched in March for up to 350 million euros, with additional buybacks to be implemented in the second half of the year. Looking briefly at the evolution of the main macroeconomic indicators in the period, Brent oil averaged $81 per barrel, 7% higher year on year, moving within a range between 61 and $127 through the quarter, so a strong volatility in the period. The Henry Hub averaged $5.1 per million BQ, 30% higher than in the same period in 2025, driven by severe weather at the beginning of the year and the ongoing ramp-up of new LNG export facilities in the U.S. Repsol's refining margin indicator was 106% higher compared to the same period in 2025, mostly driven by higher middle distillate spreads since March, particularly diesel and jet fuel. At the exchange rate, the dollar averaged 1.17 in the quarter, and 11% depreciation compared to the first quarter last year in 2025. Turning now to upstream performance, adjusted net income was 302 million euros, 5% lower year-over-year, driven by a weaker dollar, as I mentioned before, and the divestments executed in 2025. This was partially compensated by higher gas realization prices and a stronger contribution from equity affiliates. Production averaged 539,000 barrels equivalent per day, in line with the first quarter in 2025. the higher contribution in the UK, the Gulf of America and Trinidad and Tobago, was partially offset by disposals, a force majeure situation in Peru, and the lower unconventional production due to the extreme weather conditions we had in the US, mainly in January and February. Excluding these disposals I mentioned before, production was 4% higher year over year. In the UK, on the 13th of March, we complete the agreement to incorporate total energy assets into our North Sea JV. The resulting entity, that is named Neonext Plus, is projected to produce around 250,000 barrels per day in 2026, of which around 60,000 are net to Repsol. In Libya, first quarter production reached 42,000 net barrels per day, 11% above the same period in 2025, demonstrating the resilience of our operations despite a localized disruption in March. Furthermore, we have strengthened our position after being awarded with two new exploration blocks in the first licensing round held in the country in nearly two decades. in our development pipeline the volume growth forecast to 2028 will be supported by the risked projects that are already producing or close to first oils in brazil in the santos basin the development of lappa southwest reach first oil in march the project features three wells tied back to the existing fpso contributing to increase the total production in the lappa field to 60 000 gross barrels of oil per day where repsol holds a 15 percent interest furthermore the development of raya raya remember that is the former campus 33 in the campus basin enter its six-well drilling phase representing an important milestone towards the plan startup in 2028. In Alaska, the first phase of peak is mechanically complete and undergoing final commissioning. First oil is expected in an immediate period, coming days, coming weeks, and key facilities are being integrated with the objective of reaching a plateau production capacity of 80,000 gross barrels per day by the end of July, early third quarter. In the KUKA unit, that is located in the Nanushuk area to the east of Pika, the successful completion of the first appraisal well earlier this month, in April, has further delineated the potential of all this Nanushuk reservoir. In addition, our commitment to Alaska was reinforced after securing 42 new exploration licenses in the latest federal round, supporting future development plans in the area. Finally, in Venezuela last quarter, we reached a strategic agreement to ensure the continuity of natural gas production in Cardone 4. Moreover, after quarter end, we signed an agreement to reassume operational control of the petro kirikide oil asset and this includes plans to increase gross crude oil production in the country by 50 percent within 12 months and to triple it over the next three years all under a disciplined free cash flow positive framework for capital allocation our priorities in the country are clear monetizing current production and increasing our volumes within this framework next week our cartagena refinery will receive the first oil cargo linked to associated to the gas production of cardons since the issuance of the new u.s export licenses that remember we received we were allowed to with these licenses at the end of february additional cargos are respected going forward continuing with industrial first quarter adjusted net income was 440 million euros 233 percent higher than in the same period a year ago the improvement was driven by higher contributions in refining peru and the trading businesses partially offset by weaker chemicals and non-transcended sales in refining the better results due to higher refining margins were partially offset by non-transcended sales adjustments, as I mentioned before, and a negative price lag, in fact, mainly in kerosene sales. I mean, these adjustments are expected to be fully reverted in coming quarter. The refining margin indicator averaged $10.9 per barrel, roughly in line with the fourth quarter of 2025 and $5.6 higher than the first quarter last year. The indicator averaged $6 per barrel through January and February, rising in March to an average of $20 driven by stronger middle distillates as a result of the conflict in Iran. Since the closure of the Strait of Hormuz, diesel and jet fuel spreads have suffered extreme volatility resulting from the interruption of products flows and tight global inventories. HBO and SAF margins have also experienced a material increase due to the escalation of the mineral alternatives and also because the increase of the regulatory demand of this kind of products the premium generated over the indicator average 5.7 dollars per barrel in the quarter mainly due to a better crude and products balance optimization on the contribution of buyers Let me say that in this disrupted and complex situation, I mean, the margin indicator in some way is losing the capacity to define what is happening in margin terms in a refining system. So we are going to see this kind of, let me say, exceptional premiums because with the high flexibility of the assets we have all that is enabling us to efficiently adapt the crude diet and our products yield to this kind of exceptional situations and disruptions that are happening in the market that is the explanation let me say for this exceptional situation a utilization of distillation capacity reached 79 percent in the quarter, while conversion units operated at 86 percent. True throughputs were negatively impacted by the reduced availability of the topping unit in Cartagena, remember the fire we had in January, together with crude supply constraints in January and February due to the severe weather and storms that were preventing vessels from docking at some of our fires, mainly Tarragona, Petronor and Coruña. The trading businesses delivered a very strong performance in the first quarter. The operating income was 343 million euros higher year over year, reflecting a solid contribution from both crude and gas trading activities. In chemicals, Repsol's margin indicator averaged 174 euros per ton in the first quarter, negatively impacted by the sharp increase of raw material costs in March, which was not yet reflected in selling prices. The situation in the Middle East has tightened the global petrochemical market due to supply constraints on the consequent reduction of production in Asia and Europe, margins are going through a period of exceptional volatility especially affecting nafta-dependent producers with limited feedstock flexibility regarding the transformation projects within our industrial portfolio the new hbo unit in puerto llano is this week starting the production becoming our second facility in spain for the production of 100 percent renewable fuels. In renewable hydrogen we approved the construction of our second large-scale electrolyzer to be built in Bilbao at our petrol refinery and expected to start up in 2029. Remember that the project has received 160 million euros in funding from the European Union. Going on now with a customer division first quarter adjusted net income was 160 million euros a three percent increase over the same period in 2025 and this result was mostly driven by a higher contribution from mobility cash flow from operations amounted to 429 million euros in the quarter sales of road transportation fields in spain were 11 higher compared to the same period last year. Non-Oil contribution margin in your service stations was 11% higher year over year. So non-Oil is increasing step by step its contribution margin to our service station business. In a complex environment of higher fuel prices and significant daily volatility, Repsol strength is customer value proposition by doubling discounts that are applied through the wallet up as well as increasing discounts to professionals and self-employed workers these initiatives have a direct and positive effect on wireless registrations and fuel sales in power and gas retail we are the 129 000 customers in the first three months of 2026 reaching 3.2 million clients that is equivalent to a 20 percent increase year over year and as a result of a larger customer base the power commercialized by repsol was 26 percent higher compared to the first quarter in 2025. the number of digital clients reached 11.2 million at the end of the quarter, a 17 percent increase over the same period of 2025, with WILET as the main contributor. Finally, around 1,600 service stations offer 100 percent renewable fuels as of the end of March, with 62 percent of our Spanish network already providing multi-energy solutions. turning now to low carbon generation the adjusted net income was 4 million euros negative a 6 million decrease compared to the first quarter in 2025 and results were negatively impacted by lower electricity prices in spain that more than compensated the higher power production the average pool price in spain was 43 euros per megawatt hour roughly 50 below the same period last year due to an exceptionally rainy quarter. The power generated by Repsol increased by 57% year-over-year due to a higher contribution from combined cycles and renewables. Wind and solar production reached 2.3 gigawatts hour, 80% higher compared to 2025. Renewable generation capacity under operation reached 6 gigawatts by the end of the quarter, thanks to the start-up of new capacity in Spain and the addition of the last part, 133 megawatts of Pinnington solar firm in the U.S. that is now reaching its maximum capacity of 825 MW. Finally, we continue to execute our asset rotation strategy. In the U.S., the divestment of high-staking outposts agreed in December was cash-in in the first quarter, and the rotation of Pillington is expected to be launched over the course of 2026. And in Spain, we are progressing with the second phase of the rotation that was launched in 2025. Moving now briefly to a summary of the financial results in this slide, you may find an overview of the figures that we covered today. And for further details, I encourage you to refer to the complete set of documents released this morning. Regarding the outlook for the rest of the year, let me say that this is the most complex part of my speech, because first, I mean, what is known, April production has been impacted by the plan turnaround of Perú LNG refraction plant and now almost complete, which is a factor in our budget. Full year production guidance remains in the range between 560,000 and 570,000 barrels per day and that is driven by the increased production in conventional, that is already happening, and the startup of Alaska. In refining, diesel and jet prices are expected to remain strong in the second and third quarters, even in the case of the reopening of the strait tomorrow. Moreover, the drawdown of strategic reserves implies that inventories will need to be refiled, boosting European diesel demand into the second half of the year. The refining market indicator has averaged $11 in April, and the current scenario refinery maintenance plan for 2026 has been adjusted to prioritize production and feed stock flexibility. The premium over the indicator has averaged above $10 this month, underpinned by the higher share of middle distillation of mixed and increased sales to our domestic market in Iberia. Strong disruptions in spreads and discounts of our crude slate and products are allowing optimization of our planning and programming, increasing our refining premium to high figures. and with respect to the cash flow from operations outlook, and I was referring to this outlook when I said that this is the most complex part of my speech, I mean, in light of the extreme level of uncertainty and volatility, we are not providing a revised guidance at this point. I mean, let me remind you that based on the update sensitivities under the new reporting model, Every $10 increase in the Brent price would translate into roughly 250 million euros of incremental annual operating cash flow on average for the period of 2026-2028, roughly speaking, is a bit higher, 285. But, I mean, this year, because the gas component in the production is a bit higher, then the approach saying that could be, roughly speaking, 250 million euros. similarly for every one dollar per barrel increase in the refining margin indicator the cash flow for an operation would increase by around 200 million euros you may apply those sensitivities to estimate the expected cash flow for an operation under the commodity scenario you deem appropriate i mean i don't have the crystal ball that is needed to give you a guidance about the the evolution of the commodities over this year in this disrupted scenario and that being said we can confirm that between 30 to 40 percent of the additional cash generated will be allocated to shareholder remuneration in any case as i said in the in the speech of the capital markets day last month in line with our capital allocation policy to conclude this first quarter marks a solid start to the first year of our update strategic roadmap. Our recent capital markets, they establish a robust framework to deliver cash flow growth with great visibility, increase shareholder remuneration, and maintain a rigorous capital discipline. Even though the current market environment is clearly more uncertain than what we had at the beginning of the year as the closure of the Strait of Hormuz has altered international trade flows. The economic impact of the conflict will depend on its duration, the damage to energy infrastructure that we don't know in the whole dimension, and indirect effects through industrial value change and financial conditions. In this scenario, Repsol benefits by unlimited exposure to the Middle East, and our Tier 1 refining system in Europe, heavily weighted towards middle distillates, outputs, and production, with flexibility to adapt our crude oil diet. In Elysium, our advantage location in the Iberian Peninsula provides access to feed stocks and markets in the Atlantic Basin. The startup of PICA will provide near-term growth to our upstream volumes, while adding a world-class asset to our portfolio with a long-term production plateau. The improved situation in Venezuela, not factor in our projections, is another material upside to our strategic plan. At this moment, we are prudent in our financial outlook, as I mentioned before, subject to the evolution of the macroeconomic scenario in coming months, always maintaining our commitment to distribute 30 to 40 percent of the cash from operations to our shareholders. With this, I will turn it over to Pablo as we move on the Q&A, and thank you very much for your attention.

Thank you very much, Josuillon. Before opening the Q&A, I will kindly ask participants to limit yourselves to a maximum of two questions. If time permits, we will try to cover more in a second round. To begin, I would like the operator to remind us of the process to ask a question. Please, operator.

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

Thank you, operator.

Let's get started. Our first question comes from Virash Burkataria at AirVC. Please, Virash, go ahead with your question.

Hi, thanks for taking my question, and thanks for the presentation. Just the first one on refining, there's obviously a lot of volatility in that, and you're very well set up to benefit. Could you just unpack the premium as you see it? Can you talk about the biofuels contribution in the quarter and anything else to note? And just on the maintenance point you made, should we assume that refining is running at full capacity through 2q and 3q through the summer and then second question is just on the pico ramp up which you mentioned i've noticed that those barrels the alaska north slope power has been in particular bid and trade out very strong premiums relative to other benchmarks so could you just highlight when you expect to get that project to plateau thank you thank you So, first, our refining system is running a food capacity.

The distillation percentage average in April is 85-86%, that is the average of last years. You know that we try to refine or to distillate, better said, the last barrel giving us a positive margin. looking for the full coverage of the conversion and we move as far as we could the turnaround the maintenance period for instance we had a turnaround period in May in Cartagena to change the catalyst of the hydrocracker and we We moved this maintenance to October-November, so that was done. On top of that, we also had in Tarragona a turnaround that was the place also to first quarter of 2027. them so we are going to operate because now i mean it's not only a financial approach i think that now we have the responsibility as a responsible operator to guarantee that we could provide the products that our hinterland and our customers they need so you know that for instance kerosene production is very important for the Spanish economy because mainly in summer is very dependent on the aviation and the tourism season. We have been able over the last weeks, over the last two months, to invest and to change logistics in our refineries to increase our historical kerosene production. We have increased in a 25%. I mean, May, better said, we are going to be prepared to increase in a 25% of level, the level of kerosene we had three months ago in February. We are going to be able to produce 95,000 barrels a day of kerosene in our refining system from May on, that means that we are going to not only to be able to provide our customers, but even more, we are going to be able to offer an additional production to any problem or disruption that could come in the Spanish market from some other operators. I mean, we are going to be able to provide a 25%, roughly speaking, of the demand we had last year from our Kerosene customers. I'm not saying that the game is over because, I mean, we could have tensions in the market, and we could have tensions because first the countries sending tourists to Spain, they could have problems to fill their planes in their countries, in their countries of origin. Perhaps some of our competitors, I mean, I don't know the situation, so I can't speak, of course, on behalf of them. But saying that we are developing all the effort to, let me say, squeeze the production capacity we have in this second quarter with our refining system. So you could assume that, Virash, that the refining system is going to work at this full, not only capacity, I mean, adapting the products to the main needs in the market. But, I mean, again, as I said before, now the margin is not exactly the best indicator, the best KPI to follow what is happening. But, I mean, even if tomorrow, and that would be great to see that the Strait of Hormuz is getting fully operational. I mean, I think that this year, as average, we are going to see even in a full normalization of the situation in a quick way, a refining indicator that is going to be probably above $9 a barrel for the whole year, and a premium that seeing the figures that we are experiencing now and even seeing a normalization in two months, probably the premium is going to be above $5 for the whole year. And we are, of course, prepared to take and to capture these markings. I mean, going to PICA, I rely on the operator, Santos. I can't add more to the information that was provided last week by Santos. We fully agree because, I mean, our technical people is engaged in the technical team of the operations. I mean, all the mechanical part of Alaska, the mechanical is fully completed. Commissioning activities are almost finished. They are progressing well. First sales revenues are respected, rather speaking, in two months. and the plateau capacity of 80,000 barrels a day gross, of course, is expected in July. So that is, roughly speaking, the approach I could give you about PICA and let me say that the first oil is imminent. Thank you, Virash.

Thank you very much.

Thank you very much, Virash. Our next question comes from Sasi Khan Chilicuro at Jeffries. Please, Sasi, go ahead with your question.

Hi, I'm afraid I also had a question on the $10 premium to the indicator refining margin. I specifically wanted to check on one key factor that you had highlighted. You talked about spreads on the discount and discounts to the crude slate. It seems a little different from what we are hearing from your peers. I just wanted to understand what your crude slate was, how you're getting these discounts, I suppose, and also if the Venezuelan barrels and the cargos are going to make any material impact or they're already factored in this. Yeah, thanks.

Thank you, Sasi. I mean, I know that it's perhaps, and I'm sorry, because the complexity of what I'm going to explain, and that is my problem, it's not yours, it's not easy at all. But again, I mean, when we take the refining margin indicator, what we are taking is the structure of trade and the structure of yield of products and the conditions we have and we see in the market, and we budget that for the whole year. What is happening now, for instance? I mean, you know that our exposure to Middle East is tiny, but we have a 6% of Basra oil. I mean, when you introduce, you know, refining margin, the Basra, I mean, because it's a very complex crude oil to be bought today in the market, I mean, the premium over this crude oil is extremely high. So we are not, of course, using Basra in our system. We substitute the Basra by heavy oils with strong discounts coming from Latin America. So all that is improving in a dramatic way. I mean, we are taking in a very volatile situation. We have extreme opportunities to optimize the refining margin indicators that are not there every day because you have, let me say, very heavy oil. You have residues because the Brent price is very high. You have heavy oils that are competing probably with fuels and some other products that today could be in relative terms extremely cheap. And because the high conversion capacity we have in a refining system, we are taking advantage of this crude oil. So we are, let me say, beating in a clear way the refining margin indicator, going to the yield of products. Again, I mean, remember, we were producing, roughly speaking, I mean, don't take the exact figures, but we could be producing 350,000 cubic meters of kerosene per month at the beginning of this year. And that was budgeted in our refining margin indicator. What is happening now? Thanks to the investment we developed over the last two months, either operational, either logistics in some of our refineries, in May, June, we are going, from May on, we are going to be able to produce 560,000 cubic meters of jet per month. What is happening with these figures? That because the spread of the jet is significantly higher than the spread of the alternative products we were producing in a refining margin indicator, we are going to improve in a dramatic way the refining margin indicator through the premium. I mean, you are seeing this premium. I mean, $1 per barrel of this premium is coming from this change or this increase in the jet production. So, if you could say, okay, please change the margin indicator because all that is going to be more simple. That could be an option, but I'm even discussing with my own team because we don't know in this volatile situation what will happen in May or in June. So, perhaps we have to change twice the refining margin indicator over the quarter. So, at the moment, please, what is real is that the refining margin indicator plus the premium is reflecting the real margin we are capturing. The refining margin indicator is, let me say, the theoretical construction that works in a normal situation, in a normal way, and the premium is what we are capturing above this, let me say, refining margin indicator. I know that is complex, but again, I don't have another way to explain that. But saying that, when I said before to Virash that even in the case of opening tomorrow or Moose, we are seeing a minimum of nine plus five, that means that we are seeing a total refining margin over the year, even if the situation is normalized tomorrow, probably above $14 a barrel for the average of the whole year. Thank you, Sasi. I'm going to Venezuela. I mean, again, the Venezuela cargos, structurally, they don't improve the refining margin, because I have to assume that we are buying the Venezuela cargos at the same, let me say, fair discount, first value that the Colombian Castilla or the Mexican Maya or the Canadian heavy oil. That is theoretical, of course, but if there is more heavy oil in the Atlantic basin, I mean, from Venezuela, from Canada, from Colombia, from Brazil, from Mexico, and so on, the equation supply, demand of heavy oil is not so tight. So the discounts are higher. So let me say that not because one or two cargos are coming to a refining system, but because there are more heavy oils thanks to the Venezuela recovery, and I think that it's important to see that Venezuela in social and economic and production terms is starting to recover after January where a new opportunity for Venezuela started. So I have to assume that in some way, having a good access to heavy oil is good for our refining system. Thank you, Saseer.

Thank you very much, Saseer. Our next question comes from Alastair Saim at Citi. Alastair, please go ahead with your question.

Yeah, thanks, Pablo. Jesse John, I wanted to ask about biofuels. I think from memory, your biofuels investments are based on a 15% hurdle rate and a 275 euro ton of HVO versus feedstock. I just really wanted to confirm those assumptions and ask, you know, with current margins, I guess around five times that level, if that's having any impact or discussion in Spain about how REDD3 gets implemented. Thank you.

Thank you, Alastair. First, I didn't say before, but in this premium, a part of this premium is also coming from the bio component that nowadays, you know, that is included in this premium. And as I mentioned before, it's significant. I mean, when we prepare the budget of the year, we assume, roughly speaking, for this year, that the HBO minus Yuko margin could be at around $50, $875 per tonne. And those figures, roughly speaking, the margin for this year, I mean, we have to take into account that Puerto Llano is starting in the production this week, so, I mean, we missed from January to April the Puerto Llanos production, the bid for this biofuel industrial business could be at around 90 million euros, and we have to add another 25 from the trading area and 25 from the client renewable fuel So, roughly speaking, we had budgeted 140 million euros for the bio-business as a whole, I mean, taking, let me say, the comprehensive view of the business for this year. We have to take into account that today we could have 570 million euros, roughly speaking, of capital employed in this business. That is important. You know that when we talk about 570, we are taking the C43, I mean, Cartagena, Puerto Llano, plus what is now in the investment pipeline in the eco-planta, and that is, of course, it's not still producing. If we take the average as of today, so it could be $1,450 per ton of HBO minus Yuko, at those prices, roughly speaking, the industrial EBITDA, I mean, if we maintain this average over the whole year, could be at around 220 million euros, roughly speaking. And if we include trading plus the commercial side, we will be talking about 270 million euros of EBITDA. That is, frankly speaking, almost close to a half of the capital employed in this business. So that is the best picture I could provide you today, Alastair. Thank you.

Jesse, John, I mean, obviously the return on investment, that's... The return on investment of that is huge. Does that provoke any discussion in Spain about RED3?

Discussion about what? RED3, yeah.

Well, just implementing, you know, I mean...

So, first, Alistair, you are right. I mean, let me say that there is a roadmap to increase this demand that is mainly linked to mandates in the framework of the RET-3. I mean, if we take, I don't have all the figures in mind, Alastair, but if we take the potential demand in Europe this year could be a 30-35% higher than the demand we had last year due to the application of the European Elective. On top of that, we could expect some additional impacts coming from the change of the concept of the double counting in Germany, that they are also to increase the real demand and so on. So, on the other hand, you are going to have also a new capacity entering in the system that in some way is going to balance all that. But we have to take into consideration, Alistair, that the price of the HBO is in some way depending on two factors. The first, we can't forget that the HBO is also competing with the mineral diesel. So there is a component coming from the mineral diesel that is also in some way contributing to forming the price of the HBO. And you have a premium delta that comes, let me say, from the nature of the biomarket. So in this sense, about RED3, I think that increasing demand dates of RED3 could in some way increase this delta. From the Repsol point of view, let me remind you that with the new plant of Puerto Llano, we are only providing a 70% of our own sales with our customers of biofuel. So we could have even in a prudent way some kind of room to increase a bit our production, taking, let me say, a limited risk. Thank you, Alistair.

Thank you very much, Alistair. Our next question comes from Michele de la Viña at Coma Sachs. Please, Michele, go ahead with your question.

Thank you, and congratulations on the strong results in such a volatile environment. I wanted to ask two questions, Joseph John. First of all, I was wondering if the current better macro environment makes a potential liquidity event over your EMP business more or less likely. On one side, you will probably get a better valuation. On the other one, the company is able to generate a higher free cash flow in the near term. So I was just wondering how you're thinking about that. And then second, perhaps a bit of a difficult and unfair question, but I was wondering, do you have in mind a number of months where if the trade remains closed, you would end up finding it difficult to have enough feedstock to feed into your refiners. Kelly, this is not just about your refiners, it's more about the global balances. But do you have in mind a kind of duration that would really start to put the feedstock to the refining system at risk of shortages? Thank you, Joseph John.

Grazie mille, Michele. Going to your first question, I mean, I'm going to be crystal clear about that. And now I'm not in a hurry to jump into a liquidity event in this context. We have, and let me say that the two partners of the business, Repsol and EIG, we are fully aligned on this perception. In technical terms, we are fully prepared. all the reporting, adaptation to SOX, I mean all this let me say this burden we have to work in to prepare the company, to be prepared to go to the American market all that was done but going to the fundamentals, I mean I think that we are very comfortable in this 2026 year not jumping into this liquidity event, I try to elaborate we are convinced that the upstream the quality of the industry we have and not because the commodity prices and so on is is better than what we had three months ago six months ago i mean with venezuela the risk with any significant increase showing to the market that we are increasing the production or production in venezuela with all the support of venezuelan government and all the support also the american authorities with seeing that the the the payments of of the gas we produce in venezuela to help to stabilize the country they are and got in a regular and good way with alaska producing in a good way with a quokka the results we have seen in the in the wealth in quokka in the in alaska giving us new expectations about Alaska, preparing the FID of PICA2 for the beginning of 2027. I mean, when we take all that, the perception we have is that, I mean, decoupling the commodity scenario, we are going to have a better upstream in three months, in six months, and probably in one year on from now. So if we take this analysis, I'm not saying that it's right. I'm saying that it's our analysis and it's our expectation. So we are comfortable in the current situation. And let me say that we are not going to jump to a liquidity event in the short term, Michele. going and I mean the vector valuation you know the M&A world probably as far as I know or better probably and you know that I mean these temporary circumstances are not changing in a dramatic way the valuation of a business because an investor is in the long term view of the business so we are improving the fundamentals so I think that this view is, in our mind, more important than taking the opportunistic advantage of seeing the oil price high to jump into the market. So, that's our view. Going to your second question. I mean, probably, and I have had the opportunity to talk to most of you, most of you, I say, the analysts you are today following this conference in a personal way over the last eight weeks, even when we were, most of you were here in Madrid when we were having a coffee after the Capital Market Day and so on. And you know that my view has been, let me say, I have had from the very beginning a concern about what is happening in the market related to the situation in the Middle East. I mean, and I'm going to say that quote of never say never. I think that what we are seeing in the market is so disruptive, is unprecedented, that we could see, let me say disruptions, that probably we haven't experienced in any time in our lives. Saying that, we are more protected. I mean, I'm not going to say never, but we are more protected than others, Michele. And the reason is first, because, I mean, in logistic terms, we are fully dependent on the Atlantic basin, North America, Latin America, West Africa, and a bit of Northern Africa, Algeria and Libya, and a bit of North Sea. and so we are let me say in the most robust and safest part of the of the supply chain and i could imagine a war with a crude oil disruption yes because i mean we are missing probably today 11 i mean following your your your company own estimations 11 11.5 million barrels a day adding crude oil plus products and I mean we can't sustain the worldly situation so we have to if this situation goes on the only solution is the destruction of demand and probably we are going to see in this case you are analyzing, or moves that could remain close for more time, probably the demand is going to show some kind of elasticity to price. So in that case, perhaps countries or areas, and I think mainly in Asian countries, they could have more difficulties to to to get the supply not only because the logistic also because the price because i mean today we are seeing countries like pakistan bangladesh philippines and some some others that they have real difficulties to provide or to have the oil so i think that we are not going to suffer this this oil restriction and because we have a strong refining system, and I'm not only talking about, of course, Rapsol, but in Spain, I only have positive words to my competitors like Moeb, ABP, and the other companies with assets in Spain, or GALP in Portugal. I think that in the Iberian Peninsula, we have a real privileged situation to resist the situation of guaranteeing the supply in a better way than some other countries in Europe. Saying that, I mean, I can't say never because it's going to depend on the evolution of the situation.

Thank you, Joseph John.

Thank you. Gracias, Michele.

Thank you very much, Michele. Our next question comes from Alejandro Vigil at Santander. Please, Alejandro, go ahead with your question.

Yes, hello, good morning. Thank you for taking my questions. The first question is in continuation with these comments about this second energy crisis in five years. In the previous one, there were several European countries taking an interventionist view, market intervention, price caps. If you are seeing a similar potential risk of market intervention in this context, that will be the first one and the second one is about the the blackout in spain last year how is the situation in terms of potential compensation or which is the amount you are claiming insurance what can you tell us about that thank you gracias alejandro thank you so much i mean you you mentioned the previous crisis of of 2022 first i mean let me say that the nature of both crisis is fully different uh maybe for our market for repsol because in the in the ukrainian

crisis the ukrainian invasion crisis better said we didn't lack in europe a single drop of oil products over this crisis because all the russian products were diverted towards china asia india i mean some other geographies and now what we have is a real a problem of supply a product restriction remember that at that time you perfectly know because you are as a spania in november 2024 there were proposals at spanish congress to reintroduce a similar mechanisms for the energy sector from 2025 onwards and these proposals they didn't succeed because they lack the parliamentary support in spain in european level remember that at that time there was some kind of approval of some kind of reform tax that was called contribution and we have not seen at the moment a real aim to approve such a measure in european level but let me elaborate perhaps a bit more we are now in spain as i said to michele some minutes ago So we have reinforced supply system thanks to companies like Repsol, Moeve, BP, GALP, that GALP in Portugal that invested hard in the refining system. So in the case of Repsol, we have invested 15 billion euros in our industrial business in Spain since the financial crisis of 2008. And on top of that, I have to mention that we have invested more than 1.4 billion euros in the last weeks to guarantee the supply of kerosene, to guarantee the Spanish tourism season. I mean, if you suffer the losses from time to time, and every time you have profits, you suffer from confiscation, I mean, you are not going to invest anymore, of course. You are not going to invest in working capital to guarantee the supply if you don't have the incentive of profits, the legitimate incentive of making money. So it seems to me that introducing an extraordinarily levy on the energy sector would be not only unjustified and counterproductive. I think that it will undermine the security of supply and erode the competitiveness of european industry at this critical moment i mean it will take also into account that over the last 15 years at 20 percent of european refining capacity has been shoot down or either i mean i knew levy will accelerate this trend increasing the dependence on imports and in some way also reducing the security of supply so from my point of view these kind of debates, they create regulatory uncertainty, they divert resources away from investment, and also they put at risk the projects we need to decarbonize our industry and our economy, and of course, the risk is worsening the risk of security of supply in coming months in Europe. So, I tend to think, Alejandro, that these kind of confiscatory levies are not going to appear this time neither in Europe nor in Spain. Going to your second question about the blackout that you know that is a trending topic in the Spanish media these days. I mean, we know exactly what the consequences of the blackout were for Repsol. Remember that we talk about different incidents a first blackout impacting in cartagena another disruption nothing to do with that in puerto llano related to the distributor i mean if we go to the mayor blackout on april 28th one year ago which shoot down our operations for days at five refineries on three petrochemical sites remember that i explained before that we experienced a similar event in 2016 in in bilbao in the petrol refinery and in 2022 the spanish supreme court issue a decision confirming full compensation for repsol's affiliate petronor that was 18 million euros for the 12 minute blackout we suffer at that time that stopped our operations in the refinery for four days and we were fully compensated i mean roughly speaking these 18 million euros is close to the impact on each of our refineries from the blackout we suffered in April. We estimate a recoverable amount of 105 million euros in the legal claim we are entering in. So we are fully committed, Alejandro, to seeking legal accountability from those responsible for these events and we initiated this legal process last week and i mean before entering in any lawsuit the law requires the opposite party to be invited to seek a settlement and in this sense i mean last week rapsol already was complying with this legal requirement and we sent formal notices, what is called a Bureau of Access, to Reselectrica and to the distributors with which our industrial centers, they have contracts. And if this prior attempt at dispute resolution is not satisfactory, Repsol will formally file the corresponding lawsuits to all these companies. And let me say, I rely on the Spanish justice system. I believe we have a solid, reliable judiciary. In the end, we will be compensated, as we were in the Petronor case. But let me say, and I finish, Alejandro, that probably the core task may be somewhat more complex this time, because the regulator, the CNMC, didn't fulfill, from my point of view, its duties in an efficient way, because I have the impression that the regulator, the CNMC, has applied what is called in Spanish la teoría del ventilador. We could say or describe that in English as an scattergun approach. And it has mixed very serious issues that affected the supply, allegedly caused by the system operator with dozens of alleged deficiencies over a two-year period and all that is creating confusion perhaps that is what the regulator intended I mean to give the impression that is distributing blame I mean however a technical reading makes the responsibilities much clearer so again we have a solid judiciary Spanish a democratic and solid state where the The rule of law works, and I am convinced that the truth will prevail and Repsol will be at the end of the road fully compensated. Gracias, Alejandro.

Thank you very much, Alejandro. Our next question comes from Guilherme Levy and Morgan Stanley. Guilherme, please go ahead with your question.

Thank you for taking my questions. And maybe still on the refining crude procurement debate, could you perhaps even if just qualitatively share with us how much of your crude supplies currently come from purely spot transactions versus how much they are coming from perhaps the benefits of your long term relationships with different players in LATAM because I wonder if that's also playing a role here in your ability to source crude maybe better than peers. And then secondly, thinking a bit more about Upstream, perhaps pick your brain about short cycle investment opportunities that you could now pull the trigger on in light of the higher oil and gas price environment.

Obrigado, Guilherme. Going to the refining, roughly speaking, 80% of our supply comes from long-term contracts, and 20% is spot. But, I mean, saying that, we don't see, I mean, that is not our mainstream case. We don't see any kind of concern to supply our refineries. I answered before. I think that it was to Michele. I mean, we could see disruptions. I'm not going to say never, because things could be worse. But, I mean, the current situation, I think that price is going to be the concern. Price is going to be a problem. But we are going to be able to supply our refineries, I mean, in our central case, in a normal way. going to the upstream only I mean you mentioned that we have short cycle opportunities to invest due to these prices I mean you have three ways they may say to increase your production in a structural way first M&A and today is not the best moment to buy secondly exploration and the results are going to come and we continue exploring we demonstrate with Alaska a bid where we were granted with 43 new leases, new licenses. And the third one is the unconventional. And, of course, in the unconventional, we are taking flexibility to improve our position. So if we take the figures of the first quarter and we compare with what we have over the whole year, we are going to increase in 22,000 barrels a day our unconventional production. But you have to take into account that there are two effects here. First, because the cold weather, probably we were producing 10,000 barrels a day less in the first quarter because the cold we had in Marcellus and Eagle 4 and the increase of new paths that we are going to take advantage of them to increase our production over the year. All in all, 22,000 barrels a day of increase over the whole year. Indian conventional if we compare with the first quarter. If we take that, we take the Peru incident, we take the ramp up of Leon Castile plus Alaska that is going to come plus La Paz Southwest for that reason, we are quite comfortable with the guidance of 560, 570,000 barrels a day for the whole year. Thank you, Guillermo. And today, I mean, this morning, that is not, I'm not going to extrapolate today's production to the whole year, but this morning we are producing 570,000 barrels a day in our system. Obrigado, Guillermo.

Gracias. Thank you very much, Guilherme. Our next question comes from Fergus Neff at Rothschild and Redburn. Please, Fergus, go ahead with your question.

Yeah, hi there. Thank you very much for taking my question. Two from me, if I might, please. Just first on chemicals, you talked to a tighter petrochemical market in your slides. Can you just give us any color on how the chemicals business has been performing this month and whether it's been able to kind of start capturing those margins, please? And then secondly, can I just ask what you're seeing in Iberia in terms of fuel demand at your retail sites, given the current price environment? Do you expect to start seeing demand destruction if prices remain at current levels, or do you think they need to move higher before you would see any meaningful destruction start coming through?

Thank you, Fergus. So, going to your question. First, in the short term, the chemical business is performing in a bad way. And I tried to elaborate. And that is behind also the, you can see, the impairment we have introduced in a prominent way in our P&L this quarter. because, I mean, the huge increase of raw materials, NAFTA, LPG, energy, natural gas, plus, I mean, we are not able to translate these prices to our customers. I mean, the plastic producers from the, I don't know, the automotive sector, the food sector, and so on. So what we are seeing in the short term is a worsening of these margins because this short-term situation that has in some way pushed us to be prudent in terms of the value of the chemical business in our company. Saying that, we are fully focused on putting in operation the new projects that are going to give us additional margin, the ultra-high molecular weight polyethylene plant in Portogliano, the derivative chemical business in Sines, plus the electrification of crackers, as I mentioned before, plus the splitter of propylene in Petronol that is starting this second quarter its operation. With all the cost measures, improving the logistic and so on, we are enforcing. I mean, yesterday we had a board meeting, and I maintained my commitment to the board yesterday that in 2026 we aim to have zero EBITDA, a neutrality of EBITDA in our business, in our chemical business and we aim to be positive in our operational result in in the edit in 2027 so we are fully focused on on that and when we go to the the iberia fuel demand what we have seen the first quarter and in march and in april is an increase of a figure that is close to add 10 percent 10 percent in the first quarter um three four percent in april roughly speaking and that is curious fergus because it is counter-intuitive but remember i don't know what is going to happen so i don't want to i don't have a crystal ball but i only introduce a variable in the debate we have one spain received 100 million visitors a year we are after france the second country receiving visitors in the world and in revenues the second one behind the u.s so i think that we are going to see a twin a phenomenon this this summer in spain and i don't know what is going to prevail in i think that the global tourism probably is going to suffer because i mean aviation prices the lack of security in the world and so on but on the other hand Spain is a tourism destination more secure, safer than some others. And it seems to me that many northern European citizens, they are going to take the decision instead of going, I don't know where, and you could imagine places, I'm not going to mention any country, to come to Spain. So we could have a positive effect on the Spanish tourism. I don't know what is going to prevail, but taking into account this reflection, we don't see today a reduction of volumes in our Iberian business. What I'm saying for Spain, I mean, is also replicable for Portugal, that is, I mean, as attractive as Spain in tourism terms.

Brilliant. Thank you very much.

Thank you very much, Fergus. Our next question comes from Henri Patricot at UBS. Henri, please go ahead with your questions.

Yeah, two questions, please. The first one, I wanted to ask on Venezuela, good to see the progress with the payments for Cavan 4. I was wondering if you have had any more discussions regarding the payments for the past production and over the past year in particular. And secondly, coming back to a question around short cycle, potential upside due to production, I wanted to check on Libya, what's your latest outlook on the production potential near and medium term?

Merci, Henri. I mean, Venezuela, I'm going to be crystal clear about that, step by step. Now, we are fully committed to collaborate, to contribute to the recovery of Venezuela. And our main contribution to recover Venezuela, taking advantage, the opportunity we have in our hands, is first to stabilize the gas production. We are going to increase in up 10% in coming months, thanks to the bottlenecking process, the gas production in Cardón. Of course, all that under the agreement we achieved three weeks ago about the sustainability of this production. That means that this year we have a clear commitment from PDVSA to receive the cargoes that are going to pay the full gas we are producing in Venezuela. And in Petro-Kirikide, last week, we signed an agreement where, as a paying agent, Repsol, we could be able to manage the oil production, of course, paying the royalties, paying taxes, paying the OPEX and CAPEX Petro-Kirikide needs to increase the production and having a percentage, a fair percentage for the service that the operators, the shareholders, PDVSA and Repsol will provide to the petro-curricular assets. So that means more cargos to be paid, an increase in production, more taxes and royalties for the country, a contribution to the recovery of Venezuela and the social and economic recovery of Venezuela, the political stabilization in a win-win strategy. From my point of view now, and of course, we know what is the debt we have with PDVSA. PDVSA knows that. I think that, I mean, a time for that will be open in the future. No doubt about that. But now, from our point of view, it's time to do what I mentioned before. And if Venezuela recover from the current situation, if there is higher production, more revenues. I'm sure that we are going to find windows of opportunity to talk and to try to redress this question. Going to Libya. I mean, Libya, remember that this quarter we have been producing 42,000 bottles a day, even taking into account that we have an event of two, three days, an operational event in a pipe that is transporting the crude oil from El Shalada to Al Sabia in the refinery in the Libyan coast. I mean, 42,000 barrels a day could fit, roughly speaking, and I could, I mean, perhaps make I'm just taking the figure with 320 to 325, 327,000 barrels a day. And the best expectation I have today, gross, I mean, the figure I mention now is gross, that we could finish 2026 with 350,000 barrels a day. That means an 8% roughly speaking of the current production increase. That means that we could be producing something net Repsol, 45, 46,000 barrels a day in Libya. So an important improvement comparing with the 32, 34 we produced two years ago. On top of that, connecting new wells, of course, is the magic for getting these figures. We are exploring. We are now engaging in an appraisal, in drilling well in Libya. And on top of that, you know that it's water. we were a world with two new exploration opportunities, one of them on shore in the Sirte Basin and the second one offshore in front of Benghazi in the east part of Libya. So, again, we rely on Libya. Stability is there. I think that the job that, I mean, General Hatter and the Libyan army is developing, I mean, to stabilize the country, to reduce over the last year the impact of any security disruption in the country, including terrorism and so on. It's very important, not only for Libya, not only for the stability of the country, but also for the stability of Europe and the Mediterranean basin. So we rely on Libya, and I think that we are going to have in the country good news step by step in terms of political and social stabilization. Merci, Henri.

Thank you very much, Henri. Our next question comes from James Carmichael at Beregemer. Please, James, go ahead with your question.

Hi, guys. Thanks for taking my questions. Just wanted to come back on Alaska for a second. I'm just wondering, obviously, Pika looks to be going well. I'm just wondering if you can provide a bit more detail on that, the Quokka appraisal. The operator's commentary seemed to indicate some positive results there. Then obviously you've flagged winning sort of just over 40 exploration licenses. How important, I guess, do you think Alaska could be to growth going forwards? And then just coming back on refining, not to sort of underestimate the achievement, but in terms of that 25% increase in kerosene production you flagged february to may i mean is is that as far as you can push it or is there potentially sort of more upside if you see that um as the right way to go uh further in the year thanks uh thank you uh james and i mean quicker the the the test of the well was really very very positive i think that the the production was at around 2 800 bottles a day that for a test

is an impressive figure i mean it's perhaps too early to comment that but our perception today is that in gross production quokka is a new pika one i mean what we have in our hands in quokka is something equivalent to a PICA-1. If we take into account, of course, we have to drill new wells to maintain the plateau in PICA-1 in coming years and so on, but we take that. We take what we are seeing in the prospect of PICA-2. PICA-2, we are working, in fact, in the field, the preparation, the engineering preparation of the FID. But, of course, our approach fully shared with Santos is that, I mean, It's important to analyze, to see the behavior of the production of the wells of PICA-1, I mean, to incorporate, to use all this information to improve the engineering of PICA-2. When we take PICA-1, PICA-2, where we take FID here, plus COCA, and we put and project this development, I mean, we are seeing in 2032, 2033, a gross production at around 150,000, 160,000 boroughs a day in Alaska. So where we retain a 49%. So in some way, Alaska is, for Repsol, could be, let me use the term, I know that perhaps could be a bit, I mean, big words, but a bit of a company maker for Repsol because what we are growing, the way we are going to grow in Alaska is going to add a lot of value to our company. I mean, I prefer not to say and not to answer to your question in front of my refining team because when I ask to them, four weeks ago they developed a huge effort to increase enough 15% the production in Coruña and Petronor and when I asked to them about going on with this effort they answered, Joseon, that is impossible, I mean we are achieving the limit three, four days ago this extraordinary team came to me saying we have been able and we are going to be able in May to increase in an additional 10% this production. That means that all in all we are going to increase in 22-25% the previous production we have. So now my answer is no. We had and we got the limit because I mean in technical terms it's not easy. Let me say that we increase the logistics in operational terms we change things and so on but i mean 95 000 barrels a day of kerosene it means that is a figure close to a 12 13 percent of our total production it's a very high figure so my answer will be we can't do more but again we are going to do our best to increase this figure games thank you thank you very much james our next Next question comes from Nas Kui at Barclays.

Nas, please go ahead with your question.

Hey, good afternoon, everyone. Thanks for taking my questions. Two, please. The first one, you delivered very strong trading results in Q1. I wonder if you could provide some color on the trading performance in April and perhaps some of your expectations for Q2, please. My second question is, Dr. John, I agree. we are in a very volatile environment but could you just update us on Repsol's current oil and gas hedging positions and how the current volatile environment could lead you to change your hedging strategy thank you thank you Nash I mean as far as I know so April I don't of course talk about the whole second quarter april is going to be close to march in terms of a solid results in trading and the

second quarter probably because it's going to be probably even better than the the first one i'm talking about the trading of liquids because if we go to gas you know that the gas trading business of Repsol is fully impacted by the American winter. So, you know, that January, February, depending on weather, we capture a lot of positive margins because we are able to deplace the gas from Canapur towards the New England area, capturing the high margins in the area. So, as always, gas is going to be lower in second, third quarter, and fourth quarter is going to depend on the December weather, and liquids probably in second quarter are going to be even better than the first one. Hedging, we don't use to hedge the oil, the only exception we have. in $2 per million BTUs, roughly speaking, and 5.2 or something similar as a call. And we have a similar caller covering a 20% of the 2027 production with no cost, but only related to heavy health production.

Thank you, Nash. Very helpful. Seth Trostrom.

Thank you, Nash. Our next question comes from Matt Loftin at J.P. Morgan. Please, Matt, go ahead with your question.

Hi. Thanks for taking the questions and doing the presentation. Can I just ask, I mean, obviously the refining environment is exceptionally volatile. When you look at April, perhaps as an example, could you share a sense of the range in the realized margin that you've seen around the sort of the average that you've mentioned earlier? If the sort of the daily range is too volatile and too wide, perhaps, for example, as a five-day moving average or whatever you think is most appropriate. And then second, I just wanted to ask you on cash flows. Generation in operating cash flow in the first quarter is very, very strong. I just wondered if you could share the extent to which there's positive timing effects in there, perhaps linked to inventory gains that we should be aware of as we think about the cash flow trajectory for the rest of the year.

So, Matt, I mean, it's not, I mean, I agree with your point about volatility. Many, if you analyze the margin indicator, then day after day, when we see the whole picture of the margin, I mean, the indicator plus the premium is not so volatile. So, I'm going to give you the real figures. April, we have an indicator of $12 a barrel and a premium that is going to be at around $15 a barrel. So that means that we could have $25, $27 a barrel for the whole system. And some days we have seen, And, I mean, probably I have to dip a bit more, or to dive, sorry, a bit more on that, but some days, because the decoupling between the physical brand and the financial one, we saw a strong decrease of this refining margin indicator. but those days in real terms the premium we were capturing was significantly higher so all in all i mean there is some volatility as always but we have seen as quite constant margin in april that all in all as i mentioned before could be at around 12 dollars above indicator and 15 the premium and we are entering may uh tomorrow i mean under this scenario i don't know what could happen it would be great i mean to see some kind of because as i mentioned before we could have concerns about the supply and so on worldwide but the situation today is there a cash flow So, you are right. The cash flow generation in first quarter was high. You know, and we were very transparent about that, that we took advantage to increase our working capital. First, in a physical term, let me say that we have fulfilled all the capacity we have to store crude oil or products in our refining system and even contracting new capacity and so on, that means that it's not going to be easy for us to increase the physical exposure over the year. I mean, the working capital is going, of course, to evolve depending on the evolution of the price, and that is not in our hands. But if we decouple this effect, that is, of course, important to guarantee the supply of our customers in this complex and volatile time, we could think that the inventory effect is not going to have any negative influence over the year in terms of tons, of volume. I mean, we are not going to see changes. And the changes could be only positive, that means or neutral i mean maintaining the current storage or reducing the level of physical storage depending of the evolution of events if we talk about prices uh matt i mean i don't i can't give you a clue because that is going to depend on the evolution of crude oil price and products price and that is not in in our hands but i could imagine that the cash flow from operation is going to be pretty good over the year. As I mentioned before, I'm not going to give you a guidance because I'm not able to do that. But remember, we have something in between 5.5 to 6 in an environment where we were talking about $7.5 a barrel of refining margin and $1.5 of premium for the whole year, and $65 a barrel for the Brent oil for the whole year. So if you take the sensitivities that you perfectly know, of course, Pablo and the team will be ready to work this figure with you, and you take the consideration I developed in this conference, probably you are going to have some kind of real clue about the cash or from operations for the year, that, again, is not going to have any negative effect in terms of inventory coming from the volume side. If we talk about prices again, I could give you additional clues. Thank you, Matt. Thank you.

Thank you very much, Matt. Our next question comes from Paul Redman at BNP Paribas Exxon. Go ahead with your question, Paul.

Hi, guys. Thank you very much for your time. Yeah, two questions. First was on CapEx. you've guided to 2.7 billion euros for the year on a net cap basis. I just wanted to ask how much divestment or acquisition you're including in that number. And then secondly, Accelerate EU has come out. I want to see whether you're getting any or having any conversations with governments about, sounds like you're running as hard as you can around jet fuel, but whether there's any more pressure on Repsol from governments to see if you can go further.

Thank you, Paul. So, I mean, the exact figure I give in the capital market day, you are right, it was 2.7 billion euros. I mean, I'm working under the range 2.53. I mean, that's in the middle. I think that 2.7, as you mentioned, could be today our best approach to the net capex of the year. There is no any disposal or acquisition included in that figure. That means that the only, let me say, inorganic thing in this figure is the rotation, the recurrent rotation of the assets of low carbon. And let me say that it's working in the right way. If you analyze the cash figure we released this morning with the papers of the results and so on, You could see that even the renewable business, the low-carbon business, has a positive free cash flow this quarter because this model of cash flow from operations plus investment, we are growing in this business, of course, minus, in this case, the cash-in coming from the output rotation. So, now we are engaged in the final part of another rotation of 700 megawatts of assets in Spain, and we expect to have a positive result of this process. So, things are going to work in the right direction, and we are comfortable with the 2.7 billion euros for the year net capex you mentioned before. We have a very transparent, direct, and positive dialogue with the Spanish government because, of course, the Spanish government knows that, I mean, in any European country, jet is important, but I mentioned before, if you analyze the percentage of the gross domestic product that tourism represents in Spain, and if we go to areas like Balearic Islands or Canary Islands that are fully dependent on aviation, I mean, that is, let me say, in national terms, it's fully strategic for Spain, the jet production. We have a very positive dialogue with, in this case, with the Environment Transition Ministry and with the Vice President that is leading this ministry and we are informing them of all this evolution before we are developing the robustness of the refining system in spain and in this sense again as i mentioned before i can say that the game is over because it's not depending only on repsol but repsol today is ready and could say that we are going to provide all the jet that we provide to our customers last year over the whole summer and we have an excess of a 30 percent of this figure that we are ready to work in terms of trying to solve another problems that could appear and when i say another problems i'm talking for instance some other operators that they could have a gap between production and demand or what could happen imagine a flight Birmingham-Malaga transporting British tourists to Malaga that is quite normal in summer nice city Malaga and I mean if we have the product in Malaga to provide the fuel or the refueling this company needs to go to Birmingham is okay but perhaps this company could have in Birmingham a problem to be refueled so when I say that I don't know if this 25-30% of excess capacity is enough I'm talking about that it's true that now there are some kind of restrictions in regulation in the European level that every airport has to refuel a minimum of 90% of the fuel this plane needs for this flight. It seems to me that, and we are talking with the administration about that, that at the European level probably they have to change this rule because otherwise we could have problems in some European countries not able to fulfill or to enforce this rule. But, again, Repsol is going to do its best to contribute to the Spanish society in terms of guaranteeing the maximum security of supply, not only with our customers, but also thanks to the force we develop to provide additional needs. Is that going to be enough? I don't have a full answer, but we are going to do our best in this direction.

Thank you, Josh, John. I'll put my Malaga flight.

I mean, I'm from San Sebastian, but from the other side of the peninsula. But again, Malaga is a fantastic destination. Thank you, Matt.

Thank you very much, Paul. Our next question comes from Christopher Coupland at Bank of America, Maryland. Please, please, please go ahead with the question.

Thank you, Pablo. Just two more questions, please. and maybe a view as well. Josu-Jong, you were mentioning potentially having to change definitions of indicators versus premium. I hope you don't, as long as you give us the transparency that you're giving us on both. I'm very happy with sticking to the existing definitions. And to that point, if I could ask one more question on your March data. You told us about the indicator being as high as 20 then. Do you have the data for how high the premium was in March that you were able to extract? That's question number one. And question number two, sorry, a tiny detail, but just wanted to see whether you could give us some insight into the extra central cost that you have recorded in industrial EBITDA in Q1.

That sounds like a one-off in your spreadsheet at $250 million. but if not now we can revisit after the call as well thank you uh thank you uh chris so first you are right and again i have to to excuse myself because i mean the indicator is working in a normal situation but what we are seeing is fully disruptive and it's not working so we of course we are fully transparent chris and you have on top of the indications and the figures i could provide you here you have the team of paulo bonata and ready to to work with you uh in terms of of providing all the figures you need to follow what is happening in march roughly speaking the indicator was at around a 20 dollars a barrel and the premium was at around 10 dollars a barrel In the case of April, as I said before, we could be talking about 12 and 15, rather speaking. So the total figure is similar in both months. And behind this $10 of indicator of premiums over in March is the 5.7 average I mentioned before. This extra negative central cost that we reflect in industrial, I'm going to try to elaborate. it. I mean, this is happening every quarter. What is happening now, again, that because the price differences are so high, the impact in the P&L is significantly material this time. And for that reason, we have to explain that. I mean, imagine that our refining is selling in March 30th, the product to our service station network or to our trading business. And the refining business is, of course, taking the price of this product and go to the market with the final that day. But because in March 31st, the last day of the quarter, the product is still in a company included in Repsol Group, I mean, we can't, in the consolidated figures of the company, we can't take this market price. We have to discount or to reduce the real price in the market till we are able to sell this product in the market. That probably is going to happen in the service station case in April 1 or 2 and in the trading perhaps 10 or 15 days later. So that is happening. I mean, it's a rule that is working every quarter, But this quarter, because the high increase of prices, the effect of this, let me say, extra negative cost is included as a non-transcended operation that is included in the central cost of the industrial area. Be sure that these 200, rather speaking, 250 million euros in March, 250 we take not only Spain but also Peru, they are going to appear in the second quarter. And if they don't appear in the second quarter, it's because at the end of June we are still seeing, let me say, a higher increase of prices. Probably that is not going to happen. The central scenario is that these 200, 250 million euros of negative central cost plus an additional 200 million euros that they come from the lag in the pricing for the aviation sector, that you know that this industry is working with the prices of the month before, are also going to appear in the result of April. And that is perhaps behind the comments that, in a right way, some of you did this morning, saying that probably the industrial area result, the adjusted net income, was slightly below the expectation. If you add these 450 million euros that are going to appear in the second quarter, perhaps you have an answer to your reasonable doubt. Thank you, Chris.

That's great. Very helpful. Thank you.

Thank you, Chris. That was our last question today. With this, we will bring our first quarter conference call to an end. Thank you very much for your attendance.