Eni SpA

MIL:ENI

Earnings Call Analysis

Eni's Q3 2023 Sustains Upward Trajectory

In Q3 2023, Eni's strategic evolution continued with operational successes and financial strength. The company started offshore production at Baleine and exceeded the full-year discovery target with the significant Geng North find. Eni's portfolio adjusted for the energy transition, divesting Nigerian onshore assets and progressing the Neptune acquisition. Group EBIT reached over EUR 3 billion, driven by Exploration & Production (E&P), and a quarterly net income of EUR 1.8 billion contributed to a 9-month income of EUR 6.6 billion. Eni's cash flow performance was robust with EUR 3.4 billion for the quarter. They extended their share buyback program, repurchasing over 2% of shares by September end. The company's E&P sector saw a 4% year-on-year increase in production and a 26% quarter-on-quarter EBIT rise to EUR 2.6 billion, while Energy Evolution business expects a 30% higher EBITDA than originally forecasted for 2023.

Strategic Achievements and Future Plans

In a period marked by energy market volatility, Eni has demonstrated agility in delivering solid results while strategically positioning itself for the evolving energy landscape. Remarkably, Eni's swift execution brought the Baleine project offshore the Ivory Coast into production in under two years—signifying an emphasis on efficient value maximization. This project, contributing to a year-over-year production growth, forms an integral part of Eni's four-year plan targeting 3-4% annual growth. Additionally, Eni has also highlighted the extraordinary Geng North gas discovery in Indonesia, slated as 2023's largest find, which will significantly bolster Eni's move toward a gas-weighted upstream portfolio and provide robust full-cycle returns.

Operational and Financial Highlights

Eni has witnessed a 4% increase in upstream production to 1.635 million barrels per day, propelled by new ventures like Baleine, and improved output in existing fields. This upward thrust in production, combined with favorable oil prices, resulted in an elevated E&P EBIT to EUR 2.6 billion, marking a substantial 26% quarter-on-quarter growth. However, Eni's Gas and Power (GGP) segment faced headwinds, offset by a stronger refining performance and a rise in refining availability, enhancing the traditional refining quarter.

Exploration Strategy and Discoveries

The Geng North discovery, boasting a colossal 5 trillion cubic feet (tcf) of gas and 400 million barrels of condensate, underscores Eni's focused and efficient exploration strategy. This strategy pivots on pursuing large equity shares in significant discoveries, optimizing development processes for faster market delivery, and situating projects near existing infrastructure to lower costs and enhance value. Geng North, soon to benefit from an 88% Eni participation post-Neptune purchase, is poised to be developed efficiently, capitalizing on proximity to Bontang LNG plant's available capacity.

Plenitude Performance and Growth Horizon

EBIT for Plenitude soared to EUR 180 million, translating to EUR 280 million of EBITDA—a figure 26% higher year-on-year due to robust retail performance and renewable power sales. Looking forward, Plenitude is expected to double its EBITDA by 2026, with plans to achieve 7 gigawatts of renewable capacity, increase its customer base to over 11 million, and expand its charging point infrastructure to over 30,000.

Updated Financial Guidance

Guidance revisions include a raised full-year oil and gas production forecast to 1.64-1.66 million barrels of oil equivalent per day, implying a 2.4% year-on-year growth. Adjusted downstream EBIT expectations have increased to EUR 1 billion, buoyed by a strong third quarter and positive prospects in biorefining. Plenitude EBITDA projections have escalated to approximately EUR 0.9 billion for 2023, while Eni's revised total replacement cost CFFO is at EUR 16.5 billion. Coupled with this, a 2023 dividend of EUR 0.94 per share represents a 33% payout of expected operational cash flow. Total CapEx is expected to be about EUR 9 billion, which is over 5% lower than initial estimates, allowing for leverage within the 10-20% range.

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon, ladies and gentlemen, and welcome to Eni's 2023 Third Quarter Results Conference Call, hosted by Mr. Francesco Gattei, Chief Financial Officer. [Operator Instructions] I am now handing you over to your host to begin today's conference.

[Francesco Gattei, executive]

Good afternoon, and welcome to Eni's Third Quarter and 9 Month 2023 Results Conference call. Energy markets remained 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 as successfully achieving both of these things. Before digging deeper into the numbers, let me emphasize the key strategic accomplishment for the quarter. We are evolving and strengthening core business, such as E&P and GGP for the challenge of transitioning energy markets, and taking opportunity to build the new relevant businesses such as Plenitude, Enilive, Biochemical and CCUS. In upstream, in August, we began production of Baleine offshore Ivoire Coast less than 2 years after discovery, further evidence of the efficient integration of world-class exploration with a development strategy focusing on time to market and value maximization.

Production from Baleine is a contributor to this quarter year-on-year growth and its phases ramp-up is an important element in the 3%, 4% growth in our current 4-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 third-party provider as the largest in the industry in 2023. Indeed, along with Nargis announced earlier this year, Eni currently has 2 of the top 5. 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, now following the divestment of mature Congos asset earlier. At the same time, we have been advancing our agreed purchase of Neptune, a portfolio that represents an exceptional fit for us. Closing of Neptune remains on track for Q1 2024. Geng and Neptune will be important contributor to the shift in balance of our upstream portfolio towards gas. Obtaining full value of our equity production is, of course, critical and so we were pleased in the past few days to announce new LNG supply agreement with Congo, Qatar and Indonesia. We have seen really positive progress as we work to establish a leading CCUS position. Our Bacton UAE project was awarded a CO2 appraisal and storage license by the U.K. government, while we also agreed Heads of Terms' with the U.K. for the world's first asset-based regulator CCS business model for our operated HyNet project.

In Energy evolution, we are also very active. Our team met with many of you in September to update on our unique biorefining agri-hub strategy. We were also pleased to confirm an agreement to explore the development operation of our 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 resulted in over EUR 3 billion group EBIT for the quarter, driven by E&P and EUR 11 billion over the 9 months. Including associates, the proforma EBIT of the company in the quarter was EUR 4 billion and EUR 14 billion over the 9 months with a tax rate in the mid 40%, consistent with the oil price business performance and asset contribution. Net income for the quarter was EUR 1.8 billion, resulting in a 9-month net income of EUR 6.6 billion. We continue to have an excellent cash conversion, underlying 3/4 cash flow from operation of EUR 3.4 billion and EUR 12.9 billion for the 9 months stand out at the top of our historical performance with an organic free cash flow to date of around EUR 6.2 billion, which more than covers our 2023 distribution.

We accelerated the share buyback this quarter, repurchasing EUR 600 million, meaning we have repurchased over 2% of our share in the year to end September, and our buyback will continue at accelerated pace in the fourth quarter. Sharing issues are down almost 6% year-on-year. September also saw the first payment of the EUR 0.94 quarterly dividend.

As anticipated, CapEx of EUR 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 [indiscernible] change 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 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-up in Mexico, Mozambique, recovery in Kazakhstan after last year's unplanned outages. Higher production and higher oil prices helped push EBIT to EUR 2.6 billion, up 26% quarter-on-quarter and with our upstream satellites where we generated EUR 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 [indiscernible] fewer optimization opportunity 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 characteristic of our exploration strategy because Geng North is such a good example we are focused on gas. We seek a large 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 reduce the development cost and enhancing value. Our distinctive power-in house development process help us optimize the time to market. And as a result, not only Eni is consistently the leading global explorer in multiple basin among our peers, but also deliver 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 is the industry larger discovery year-to-date. While 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 app 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's also worth noting the discovery, there is further more TTCF 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 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 EUR 328 million, up Versus sell-offs at Q2, down somewhat year-on-year on scenario effect, 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 EUR 270 million 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 Louisiana, well in advance of our original plan.

And as a reminder, income from investment in the downstream is primarily our stake in the Adnoc refinery. Versalis continued to be impacted by weak demand, energy cost and intense competition in the chemical sector. This emphasized 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 our unique and integrated business model. EBIT for Plenitude for the quarter was EUR 180 million, equivalent to EUR 280 million of EBITDA.

Along with Power, EBIT of EUR 290 million was 26% up 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 planning to 2023 EBITDA to be 30% higher than the original guidance. Start-up of 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 4 new photovoltaic project in Italy adds to medium-term progress also.

This distinct growth profile will continue to be a future of Plenitude as we double 2023 EBITDA by 2026 reaching 7 gigawatts 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 now had 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 4 quarter exit rate of close to 5% growth year-on-year.

We can confirm our GGP guidance in the range of EUR 2.73 billion (sic) [ EUR 2.7 billion - EUR 3 billion ], we are raising proforma adjusted downstream EBIT to EUR 1 billion from EUR 0.8 billion, reflecting the stronger third quarter and a better outlook for the last quarter in both traditional biorefining. This is part offset by continued challenging conditions faced by Versalis.

Within downstream, Enilive proforma EBITDA is raised to EUR 1 billion from guidance of more than EUR 0.9 billion previously. As we have lighted, we are also raising our full year guidance for Plenitude EBITDA to around EUR 0.9 billion.

With this change, we now expect replacement cost CFFO to be around EUR 16.5 billion, up from EUR 15.5 billion [ - EUR 16 billion ] previously and the EBIT to be around EUR 14 billion, EUR 2 billion higher than our midyear view. We are on track to deliver all our original target despite weaker scenario conditioned than planned. With business outperformance across Eni, delivering around EUR 2.6 billion of additional underlying EBIT.

Our planned buyback remains at EUR 2.2 billion and while we continue to expect to complete by April 2024, we are also accelerating this pace in the month of 2023. With our dividend, EUR 0.94 per share for 2023, our distribution is equivalent to 33% of expected cash flow from operation. We expect CapEx about EUR 9 billion, over 5% lower than our initial plan with a precise figure determined by timing around the project activity. This all means we continue to expect leverage in the 10%, 20% range.

In conclusion, we continue to deliver excellent operating and financial results and strategic progress. We can reward investor to reinvest in the business for future value and maintain a resilient financial position in volatile times. Meanwhile, we are also transforming building on our strength and developing a new line of business as opportunity present themselves. This concludes my prepared remarks and together with Eni top management, I am ready to answer your questions.

[Operator]

[Operator Instructions]. The first question comes from Giacomo Romeo of Jefferies.

[Giacomo Romeo, analyst]

First question is around your shares buyback program. Francesco, you speak to the fact that you have -- you are accelerating in Q4, the pace of the buyback at current pace indicates that you should reach around 2 billion by the end of the year. Just wanted to check when do you think that the EUR 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 EUR 3.5 billion mandate from the AGM in order to bridge the period when you finish EUR 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 EUR 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? Or is there any sort of -- do you have any visibility on potential negative impacts from contracting negotiations next year -- in the next quarter? Just if you can share some color there would be helpful.

[Francesco Gattei, executive]

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 EUR 2.2 billion as a target and the flexibility up to EUR 3.5 billion subject, clearly, to the improvement towards our cash flow from operation expectation. So that flexibility will be, let's say, optional in case we will see an improvement above the EUR 17 billion threshold that under the current, we have not, let's say, yet achieved.

In the quarter, you mentioned that we'll close according to your estimate around the EUR 2 billion. I think that under the current estimate so far the past pace of EUR 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, 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 will be, but you will see the figure in the acquisition and the time that we will publish every week. Then now I leave to Cristian for more color.

[Cristian Signoretto, executive]

Yes. So thank you. So the third quarter results were in line with expectations as guided in the last conference call. And 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 expected outcome of an ongoing arbitration, which is going to be ruled in this -- going the next quarter.

[Operator]

The next question is from Biraj Borkhataria of RBC.

[Biraj Borkhataria, analyst]

The first one is on exploration. Very helpful slide that you put in today. Obviously, this is probably the way Eni has created the most of value over the last decade, and it's clearly a strength of the company. So I was just wondering how you're thinking about your exploration budget going forward and into the next couple of years. You see your U.S. peers buying upstream resource in quite a big way and clearly -- oil and gas demand are 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 had a big position there. I just wanted to get some thoughts on the ground because LNG exports there have been minimal, which is normal for the summer, but also we're not seeing much in terms of exports for October. So I was wondering if you could comment on production levels or projects like we saw 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 Bontang and for LNG and I'm assuming there's capacity there for more exports, right?

[Francesco Gattei, executive]

Thank you, Biraj. First of all, about exploration, just to -- have you seen in the past that they continue to perform. We perform through budget that were maintain probably let's say, in a steady way, notwithstanding the industry has substantially reduced this kind of activity because we also selected the capacity, the opportunity near field, and we were able also clearly to take advantage of our internal skills and the capability to process to our supercomputer seismic emerging and therefore, to derisk the uncertainty. I will leave to Guido the answer about additional color on the exploration, clearly, Indonesia plan of moderation and Egypt Zohr production.

[Guido Brusco, executive]

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, but also a minor component to the high impact well. And this was the strategy over the last 7 years, which proved to be very solid and which we delivered upon. About Geng, Geng is clearly -- it shows the successful 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 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 on the exploration, which could extend significantly the plateau.

In front of us, there is an LNG plant, Bontang, with a capacity of 22 million tonnes per year, which is, I would say, almost empty at the moment, the capacity utilized is 5.6 million per ton per year. So we will be plenty of capacity to accommodate the plateau production coming from 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 activity to enhance the capacity of the facility to handle the current level of production of Zohr.

[Biraj Borkhataria, analyst]

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

[Guido Brusco, executive]

We are not having issues with the currency because our contracts are in dollars. So we don't have any impact on the valuation of the currency.

[Operator]

The next question is from Oswald Clint of Bernstein.

[Oswald Clint, analyst]

Yes. I'd like to go back to Indonesia 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? Is this -- can you get this into 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 license 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 & Money this year was saying, he had to say no to a new FPSO job for a top client talking about 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. And so I wanted to ask about pressures you're experiencing and ultimately, just how robust that 3% to 4% volume growth is in the 4-year plan.

[Francesco Gattei, executive]

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

[Guido Brusco, executive]

Now clearly, the pickup of the activity, both traditional and grid is putting pressure on contractor, both in terms of capacity and ability to deliver activity, but also in terms of cost inflation, we know that from '21 to '22, there was an increase of 10% of cost overall, 7% from '22 to '23, and we expect a 4% year-on-year in the following year. So this clearly is factored in our CapEx estimation. The quality of Geng is such that we expect a very competitive unit cost per development. In terms of further exploration, I would -- in the surrounding area, I would leave the floor to Aldo to give more color.

[Aldo Napolitano, executive]

Yes, thank you, Guido. Yes, we are defining the plans for next year and future years in terms of further drilling in the areas 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 -- so just a few months ago, actually had the award of another block in the area to the Peri Mahakam and as already explained, we have increased our shares in all other blocks where we believe there is a good potential. So we have not yet defined in details our plans for future drilling, but certainly, this will be a focus area.

[Guido Brusco, executive]

You had also a question sorry, on the confidence of the planned 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 projects -- significant projects from other affiliates and our satellites in Angola, a new gas project and Agogo development and from Vår, Johan Castberg and Balder X. So with this pipeline of projects, which has been most of them already sanctioned in the plan, and in execution, we are very confident to deliver this planned growth.

[Operator]

Next question comes from Alessandro Pozzi of Mediobanca.

[Alessandro Pozzi, analyst]

The first one is on [indiscernible] in carbon capture assets. And I believe recently, you announced a new agreement with the U.K. with regards to high net and you secured basically the first asset-based regulated model. I was wondering if you can give us a bit more color on the economics and what are the, let's say, the pros versus a more traditional model? And 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 tonnes per annum by 2016 (sic) [ 2026 ]. And I believe that you are basically pretty much there with the new volumes, so I was wondering whether you could see 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 when 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?

[Francesco Gattei, executive]

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

[Guido Brusco, executive]

Yes, you're absolutely right. We have agreed with the U.K. authorities, the main economic model terms. And 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 an FID -- cluster FID, which includes also the emitter by the quarter 3 of 2024. The pricing is clearly -- and the economic model is based on regulated asset base model, which is still, as I said, under finalization with the regulator. And it will include also some mitigations mechanism to reduce the risk related to this first-of-a-kind project.

[Alessandro Pozzi, analyst]

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

[Guido Brusco, executive]

Yes. Basically, it is -- this is the mechanism of model.

[Francesco Gattei, executive]

[indiscernible] on the overall cost, including also the operating cost?

[Guido Brusco, executive]

Yes.

[Cristian Signoretto, executive]

So on the LNG portfolio, let's say, on the LNG supply contracted portfolio, as you said, we have advanced substantially with these last 3 agreements that we have signed. We are now around 13 million tons contracted capacity. We want to achieve the 18 million tonne by 2026. And sure, I mean, I think the big evolution on the Geng North discovery, this will give us some upside on the target that clearly we are going to take into consideration when we draw the next plan.

[Guido Brusco, executive]

Yes. As far as the size of the potential North Hub, of course, is still premature to say, but for the size of the -- for the size of the current discovery and the asset and the knowledge we do 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 barrel per day. This is for the knowledge, information and data we do have today, of course, we are still assessing the discovery.

[Alessandro Pozzi, analyst]

Okay. So 50,000 to 60,000 barrels of liquids plus on top the dry gas.

[Guido Brusco, executive]

Yes, the dry gas.

[Alessandro Pozzi, analyst]

Okay. So it's doubling basically, more than doubling the production from Indonesia at the moment.

[Guido Brusco, executive]

More than doubling our production from Indonesia. As you know, the Southern area hub asset, Jangkrik as the capacity 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 assets would decline, we will maintain for longer this plateau. Yes. So we are almost more than doubling the production.

[Alessandro Pozzi, analyst]

Interesting. And I guess, FID probably sometime next year.

[Guido Brusco, executive]

Yes. This is the plan, of course, many moving parts, stakeholder engagement, final assessment appraising of the discovery, but this is the target.

[Operator]

The next question comes from Irene Himona of Societe Generale.

[Irene Himona, analyst]

My first question also on Indonesia, please. And congratulations on this substantial fine. If you could perhaps give us a sense with the knowledge that you have now a sense of timing for this start-up. And then is there enough uncommitted CapEx in the 4-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 U.S. have lifted sanctions at least for a few months?

[Francesco Gattei, executive]

In terms of CapEx, clearly, we are working on the 4 year plan, with all the change that we are discussing, the sanctioning, the evolution of the portfolio, the new discovery that is clearly as a high rating or ranking in our plan because of the clear advantage of these volumes in terms of value, in terms of cost, so I think that you shouldn't expect a major increases. There is a flexibility, as you mentioned, there are the commitment generally are clearly more focused on the first year. Then there are declining firm commitment in CapEx along with the plan. So the space room for accommodating new initiatives.

On Venezuela, Venezuela clearly is now is an opportunity. Clearly, we are still evaluating which are the option in terms of creating an additional stream for recovering our exposure. So far this year, we can say we were 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 lifting. I don't know if Guido would add something more on the Indonesia start-up and Venezuela activity.

[Guido Brusco, executive]

No, on 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 project when there are assets which are more attractive than others, we reshuffle and we continue to reshuffle our activity plan.

[Operator]

Next question comes from Michele Della Vigna of Goldman Sachs.

[Michele Della Vigna, analyst]

Congratulations on the strong results. I have 2 questions. The first one comes back to Egypt. I was wondering if you could quantify the impact of potentially not setting 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 the age of higher interest rates, I was wondering if you could clarify a list some of the moving parts between variable [ debt ] and how much benefit you can actually get from the abundant cash that you have on the balance sheet?

[Francesco Gattei, executive]

I leave that to Cristian, the first answer and then I'll keep the second one.

[Cristian Signoretto, executive]

Yes, sure. So the current shutoff of the Tamar field clearly has an impact on the balance of the overall region because, as you know, I mean, Egypt was important -- is still important just 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, I mean, we will see export resuming once this effect will be notable. When it comes to the impact on GGP, the range that I gave -- 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.

[Francesco Gattei, executive]

About debt, I think that we are in a very, let's say, 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 large 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 is 0.8%. So the increase of the interest rate is benefiting more proportionally our balance sheet and therefore, we are exposed to this trend, clearly, that will reduce at the end of our overall net cost.

[Operator]

Next question is from Henri Patricot of UBS.

[Henri Patricot, analyst]

I have 2 questions, please. The first one on the guidance for 2023 for EBIT raised to EUR 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 by the macro environment in the fourth quarter? And secondly, I want to come back to Enilive and the performance. So we could see the guidance going up for the year. Looking just on 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 performance on the [indiscernible] side, whether there is more pressure on the marketing business, interesting in any details here.

[Francesco Gattei, executive]

I have missed the second question. On the first one, you have to consider that this -- our business are not, let's say, are subject to seasonal fluctuations. Therefore, you cannot extrapolate linearity between the various segments. So there could be clearly more linear performance in the upstream at GGP retail 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, downstream marketing. There is clearly, as we mentioned, a relatively mild change in GGP, all the rest are relatively steady. In terms of the market of biofuel, I leave the question the floor to Stefano Ballista.

[Cristian Signoretto, executive]

Yes. The third quarter results for Enilive have been robust. We got to EUR 271 million. There is a reduction compared to last year's third quarter. It's related to the marketing business. And reason is twofold. Last year, we experienced one of the highest historical margin on retail. This year, year-on-year, we are experiencing on marketing, retail competitive pressure that actually rose together with the rising of the oil prices. On the other side, we got extra result on wholesale activities, wholesale business, still on marketing. And this is thanks to a new strategy focused on overall optimal trade-off between volume and margin.

This started at the beginning of the year. And if we look at the global figures of the first 9 months, we are getting to a plus 9% compared to the 9 months of last year. We are landing at EUR 611 million of EBIT. This is due for this wholesale strategy and also given the optimal performance on biobusiness. Given these figures, we see an EBITDA guideline increased to around EUR 1 billion at the end of the year.

[Operator]

The next question is from Henry Tarr of Berenberg.

[Henry Tarr, analyst]

Two, if I can. One, I think you mentioned an arbitration in GGP potentially coming in Q4. Can 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 sort of gives an indication as to the aim for that unit. Is there anything else that can be done sort of on a medium-term view to improve profitability there? And how do you see sort of margins moving as we look into Q4 and 2024?

[Francesco Gattei, executive]

Two questions, the first for Chris and the second for Adriano Alfani that is the head of Versalis.

[Cristian Signoretto, executive]

So look, the arbitration that I was referring to is litigation around long-term contract that has been ended already. 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.

[Adriano Alfani, executive]

About Versalis and Novamont acquisition. Clearly, 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 portfolio product, but also portfolio in term of market participation. And 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 term of chemistry industry is pretty challenging. We don't expect significant improvement in Q4 also because Q4 is a low season for some market 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.

[Operator]

Next question comes from Massimo Bonisoli of Equita.

[Massimo Bonisoli, analyst]

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 the gas uptake? Or would you like to keep those volumes for the spot market?

[Francesco Gattei, executive]

Stefano Goberti for the Plenitude question. And again, Cristian Signoretto for the LNG.

[Stefano Goberti, executive]

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 rumor around, but no clear picture yet set. We will participate in the bidding. It's still early time to see whether our bidding will be very much successful or not. Of course, we will play our game there. And in terms of margin squeeze, let's see what's the rule of the game will be set at the end with the regulation in place. And then we will decide how to participate and what to do exactly.

[Cristian Signoretto, executive]

So on the LNG portfolio, as you can imagine, we have a strategy of allocating our supply portfolio to different line of business. So clearly spot and keep 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. And this is, I think, a good moment also to be in the market given the appetite for long-term LNG contracting in these part of the world. And so we are currently actively marketing our portfolio in that part of the world.

[Operator]

The final question is from Alejandro Vigil of Santander.

[Alejandro Vigil, analyst]

I have 2 questions about Plenitude. One is about the performance of the retail business in the third quarter has been very strong, if it can 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 in this -- for this business?

[Francesco Gattei, executive]

About the process, the process of sales, then I will leave it to Stefano for the question on the performance of the third quarter. The process of sale is continuing. The discussion are continuing a lot of details, a lot of let's say, negotiation and paper work 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.

[Stefano Goberti, executive]

Thank you, Alejandro, for the question. Of course the quarter was a very good quarter, EUR 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 with working on the client base and also offering the -- what we call it, added value services. So of course, these results are not one-off, are repeatable. That's why we also increased our guidance to year-end to EUR 900 million of EBITDA.

[Operator]

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

[Francesco Gattei, executive]

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.