Claudio Descalzi - Chief Executive Officer and Director Massimo Mondazzi - Chief Financial Officer Marco Alverà - Senior Executive Vice President of Midstream Luca Bertelli - Director.

Michele della Vigna - Goldman Sachs Group Inc., Research Division Irene Himona - Societe Generale Cross Asset Research Lydia Rainforth - Barclays Capital, Research Division Theepan Jothilingam - Nomura Securities Co. Ltd., Research Division Oswald Clint - Sanford C.

Bernstein & Co., LLC., Research Division Thomas Yoichi Adolff - Crédit Suisse AG, Research Division Jon Rigby - UBS Investment Bank, Research Division Neill Morton - Investec Securities (UK), Research Division Nitin Sharma - JP Morgan Chase & Co, Research Division Mark A.

Bloomfield - Deutsche Bank AG, Research Division Christopher Kuplent - BofA Merrill Lynch, Research Division Christyan Malek - Nomura Securities Co. Ltd., Research Division Roberto Letizia - Equita SIM Spa, Research Division.

The first in upstream -- is upstream, where we will continue to leverage on exploration, increase the efficiency of our project development and ensure production growth. The second is the mid-downstream, where we'll remain strongly focused on the turnaround strategy to create more efficiency and resilience.

The third is retail gas, which is focused on its own specialized business area. We have centralized the major activities to support our business. Development, operation and technology will work across all the business lines to engineer, execute and control Eni's project, operation and technology deployment.

The staff's functions have been simplified to give us a more accelerated and efficient decision-making process and improve communication among the businesses. Now a closer look at the upstream, where we continue to expand and diversify our portfolio, add significant resources and deliver sound results in development and production.

We have substantially reloaded our portfolio in the recent months by entering new countries, such as South Africa and Myanmar, and acquiring new areas in Nigeria, China, Kazakhstan and Vietnam for a total of 42,000 square kilometers. Exploration is one of Eni's most distinctive characteristics.

We will continue to target conventional assets, enter emerging basins and apply new geological concepts in proven plays. Our new acreage enhances our focus on the Pacific basin, a growing area for exploration potential, and increase the diversification of our portfolio. Exploration is continuing to deliver.

In the first half of 2014, we discovered more than 400 million barrels of resources, mostly in Congo, Egypt and Nigeria. These many oil fields are close to existing facilities, allowing the fast-track development and will contribute 25,000 barrel per day of equity production in 2015.

The Gabon discovered, announced this morning and not yet included in the discovered volume, is a confirmation of our strategy on the pre-salt plays and exploration approach. Moreover, during the quarter, we continued to increase the value of our projects. In Venezuela, we signed an MOU to develop and produce Perla condensate reserves.

Production in 2014 is proceeding well, with Libya and Nigeria in line with the guidance, notwithstanding the shutdown on Wafa during the month of April. We confirm a flat production in 2014 versus 2013 and our long-term guidance of 3% growth rate to 2017.

Next year, in spite of the delays in Kashagan and Angola LNG, we forecast that production will grow by 3% versus 2014. Let me tell you more about the promising discovery in Gabon. Nyonie is a pre-salt discovery in about 30 meter of water depth and in close proximity to the coast, where we found a hydrocarbon column of 320 meters.

It is a gas and condensate discovery, with initial potential of 500 million barrels of oil equivalent in place. The structure is more than 40 square kilometers, covers 2 blocks, where Eni has a participating interest of 100%. We will drill additional appraisals to assess the full potential of this discovery.

This is the third field discovered in the promising pre-salt plays in shallow water offshore West Africa after Nene and Litchendjili in Congo. The overall potential of these fields discovered in the last couple of years is estimated at 3 billion barrels of original recovery in place. And there are still possible upside.

Now I'd like to share my views on how to unlock the full value from our large exploration discoveries. Our approach from the beginning has been to acquire high stakes in exploration assets and apply a dual-exploration model.

This blends the traditional drive of exploration for resource replacement through development, typical of a major, with a high-risk, high-reward attitude of a smaller independent, which focuses more on the early monetization of discoveries.

Accelerating cash-in and balancing cost and risk exposure is the best option to maximize the value of our exploration, guarantee the long-term reserve replacement, bring forward cash flow generation and, eventually, rebalance our appraisals worldwide.

Given the recent discoveries and the additional potential of our acreage, we are elaborating a new plan. And at the moment, we have increased the disposal program by EUR 1 billion in the next full year plan. Last February, we announced 26 major startups, which will contribute 500,000 barrel per day at the end of the plan.

In 2014 and '15, we will complete 15 projects, mainly throughout Europe, U.S., West Africa and Venezuela, which will produce more than 350,000 barrel per day in 2017. Our projects are mostly on schedule with very limited cost overruns.

Through the new centralized development organization, we have reinforced the presence of our own engineers in each project with their direct involvement in all the executional phases and management of all the different packages. The first successful application of this model is in Angola Block 15/06.

We already had the sail-away of the FPSO, and we plan to start up during the last quarter, only 44 months after the FID. In the Gas & Power, we have significantly improved our targets. We concluded 2 major structural renegotiations with Gazprom and Statoil, and our commercial activities are performing better than expected.

We will be cash positive in 2014, and we will bring forward EBIT breakeven to this year. With respect to the price, more than 60% of our supply portfolio is now hub-related. We target full alignment of our portfolio by 2016, in line with the guidance given in February.

In addition to the price discount, we reached a significant reduction in the minimum offtake requirement, and we have increased our sales activity at the hub. This will result in a material cash improvement with a substantial recovery of the EUR 1.9 billion take-or-pay prepayment by 2017.

All these factors represent a EUR 2.7 billion cash improvement versus the previous plan, with EUR 1.4 billion being generated in 2014 and '15. In refining, in February, we referred to a program that aimed to cut 35% of capacity by 2016.

A 30% capacity reduction has already been achieved, including the conversion of Venice plant to a biorefinery, the sale of our Czech asset and the restructuring of the Gela plant. However, the continuous falling refining margins and the structural weakness of the European market forced us to tackle the situation more aggressively.

We increased the capacity reduction target to more than 50% by converting and restructuring most of our plants in Italy and through the reduction of our international presence. The new program has already been presented to all the relevant stakeholders.

With the positive contribution of the Marketing business, we have improved our target to -- of operating cash breakeven at the end of 2015 and EBIT breakeven in 2016. An important part of our action plan is the efficiency program to reduce general service costs that were originally around EUR 2 billion per year.

We deployed a new organization and implemented a cost-efficiency program, which has brought us a reduction of EUR 250 million this year and will guarantee a structural reduction of EUR 500 million from 2015, giving a cumulative saving of EUR 1.7 billion over the 4 year plan.

With the result already achieved and the ongoing action plan, we will generate, in 2014 and '15, an additional EUR 2 billion of cash that will more than compensate for the impact of project delays and the weaker downstream scenario.

Therefore, cash from operation will grow quicker than expected to reach a yearly average of more than EUR 15 billion versus the EUR 11 billion of 2013. Furthermore, in 2014 and '15, we confirm to cash in an average of more than EUR 3 billion per year from disposals.

To sum up, the main objectives of our restructuring and the new action plan are to increase earnings and deliver robust cash flow growth.

We are convinced that we have all this skills and tools to continue with our exploration success, optimize project execution, confirm production guidance, enhance all the mid-downstream result and all with a strict control of capital expenditure.

The first result of these action are a significant increase of more than 40% in operating cash flow and a growth in our free cash flow of 20% versus the last year. Thank you for your attention. Now we are ready to answer to your question. Thank you..

Good afternoon. We are now ready to start with the Q&A session. We will start with questions raised from the floor. And later, we will answer to potential demands from the phone. Before asking, please stand up and state your name. Thanks..

It's Michele della Vigna from Goldman. Claudio, you lay out a very clear plan on how to improve the cash generation in the company.

I was wondering, in terms of cash return to shareholders in the form of dividend and buybacks, how do you see them evolving from here, especially at a time when cost of debt is so cheap? I think you've recently issued a 15-year bond yield at below 3%.

How do you think about opportunities for potentially ramping up the buyback and the outlook for the dividend?.

So what -- I can say that we are working really hard to recover from this European market that is very depressed. So our main focus now is really to be able to restructure our downstream business, our Gas & Power business. I think that we succeeded in these first steps to reestablish good cash flow generation.

And I think that we have, in front of us, in term of cash flow and also earnings, a good situation, but we are still -- we have still to work a lot. But I think that it's positive. So I think that there is no problem to confirm, first, our policy at the moment.

So we don't have to say anything new about our policy and also -- as you know, also to confirm our dividend. To -- for the future, as you know, we have to wait next strategy to talk about policy or to talk about a different kind of dividend. At the moment, I think that we are working hard.

We are in a good position to confirm, also for the future, the policy and the level of dividend. It's clear that our dividend is linked to -- is going to grow as our policy, with the earnings and with the strong cash flow. And so that is, in substance, what we can say at the moment about the dividend. The first step is positive.

Now we are in a situation, in a position, a very safe position from that point of view..

Irene Himona?.

Irene Himona, Société Générale. I have 2 questions, please. Claudio, you spoke about disposals. So I wonder if you can share with us how you think about Saipem. How does it fit in the plan? Are you looking to sell it? And what would be the time frame? And secondly, a question on Kashagan. You have told us that the pipelines need replacing.

Could you give us an idea of the cost and the time frame for that? And in your targeted production growth, when do you assume Kashagan actually starts?.

First, Saipem. For Saipem, we are studying different options. I already said that -- Saipem is a very good company. It's progressing very well. We like Saipem very much, but as an oil and gas company, I think that it's not core to have a stake in a contractor company. We are the only one. So we are thinking about different possibilities with an advisor.

So the process has started. We are just at the very beginning of this process. So I cannot tell you about which kind of options or when we are going to do that because we are not in a rush. I assure you that we are in a good position from a cash point of view.

So it's more a strategic move, than a need for cash, but it's clear that we're going to do that at the right time. We are going to keep the market informed. And it's clear that what we are going to do is really for Eni and for Saipem. So we want to maximize the value for both shareholders.

And I think that we will be back on that, but that is the clear position. For Kashagan, Kashagan is -- what we are doing now -- I think that all the tests and the analysis has been done, and we are -- we have a clear idea about the reasons -- or the reason of this problem.

We don't have still the time in mind because we wait for the operator that is working on the market, investigation for the pipe supplier. We already started to -- some tender and also some purchase of piping. So we are -- I think that we are on a fast track. But we don't think that is on my -- in our budget.

We didn't put any production in 2015 and some production in 2016. I think that as soon as the market investigation will be finalized in September, October, we will talk -- or the operator talk to us and then to the market about timing and costs. But it's clear that our expectation in '12, sometimes reduction in 2016..

Lydia. Pass the mic..

It's Lydia Rainforth from Barclays here. Two questions, if it could, the first one on OpEx and the cost-cutting that you set out this afternoon.

Can you just walk us through what sort of areas you're expecting to save that money in and just examples of what that looks like? And what, if there are any difficulties around that? Or if you think that's a very achievable level in the sense of is it easy to do or is more to come later? And then secondly, just on the -- you set out the 2014, '15 targets.

Can you just talk about how you'd expect '16, '17 cash flow to evolve relative to the previous plan as well?.

I'll say a few things about our cost-efficiency program. That is not really related to OpEx, then Roberto can say something about OpEx, and Massimo can say something about the evolution of the cash flow. The efficiency program is coming from -- we restructured the company. So we don't have any more a B corporate. We centralized all the services.

So we have different area, where we already -- not only plan, but where we started -- studied a very aggressive efficiency program and I talk about a target of EUR 1.7 billion in the full year plan, so EUR 500 million each year. And that is something that we are doing out there, we can say, at the corporate level.

For OpEx -- do you want to say something, Roberto, about OpEx?.

Well, about OpEx, we are at a level of 8.7 in second....

Dollar..

$8.7 per barrel in second quarter, which is showing a slight increase mainly due to ramp-up and new projects that are bringing more fixed cost. Thank you..

Okay. And in term of cash flow, as far as 2016 and '17, we -- at the moment, we don't have any significant reason to change the estimation we made -- we presented during our last 4 year presentation..

Theepan Jothilingam from Nomura. I just wanted to come back to your revised sort of cash flow trend.

Could you just walk us through the moving parts, particularly on the contribution from E&P near field production and also working cap? What are the revised assumptions there?.

In term of cash flow, as far as the production, I would say that nothing happened in the short time. The most significant info we can provide to you is that, as said, some of the brand-new exploration successes could be brought into early production, contributing something in the range of 25,000 boe per day, indeed, very early times.

So this could be something that could help us to sustain the free cash flow in the short term. And the second question was about....

Working capital..

The working capital, definitely.

Working capital, we expect a significant contribution from, especially, the Gas & Power, the mid-gas, thanks to the renegotiation of the contract we just had in the last months that has been reported by Claudio, will give us the opportunity to recover the majority of the EUR 1.9 billion we had in prepaid gas at the end of 2013 in the next 2 years..

If I can add something because from a corporate point of view, I said that we have all the other companies, so Gas & Power or the reduction of capacity in them. So that is a contribution. For E&P, we have also a production. We have new projects. We have an increase of 3% from last year, expected this year.

But we have also what we -- I mentioned before, what we -- I call dual exploration. So we have some blocks, a lot of blocks, where we are in excess of 80% working interest. So there is a clear plan and there -- and we found interest around in the market to step in to firm in.

So that is a, for us, also from a balance sheet point of view, you -- we don't -- we are -- it's a special item, but we consider really and bringing forward our cash and bringing forward our production and the exploration, reducing our stake.

So that is another step to compensate, especially for the next couple of years, some lack of cash coming -- or our cash flow coming from -- especially from Kashagan. With all these actions, considering also the other actions, are going to create a cash flow that is in excess of what is not present because of Kashagan, especially..

Oswald Clint of Sanford Bernstein. First question, just on Gas & Power, I guess you were surprised by the deal you did with Gazprom this year. It's allowed you to revise your guidance....

We're not surprised..

Yes..

You are surprised..

Against the Russians?.

No, we're not surprised..

But -- so that's helped you revise that guidance and you have 60% on hub at the moment, and you hope to get that 100% by 2016.

So could you be surprised again -- or what chance -- why are these renegotiations being easier and could become easier and you could get to 100% hub exposure faster than 2016? And then secondly, just on the refining plans, you mentioned -- Claudio, you presented these plans to all the relevant stakeholders and hoping for cash breakeven by next year.

So what's the necessary plans or steps we have to watch out for to see that being actually executed?.

Marco?.

So on Gas & Power. Thanks for the question, Oswald. Really, I think surprised is not the right word. I think we when we gave the guidance, you remember we had an ongoing arbitration with Statoil, which was very significant, and we had a very concrete risk of an arbitration with Gazprom as well.

And I think both have been solved commercially, which is always preferable, and both have been solved at a level of which aligns them essentially to the hub. Now there's going to be ongoing revisions to these contracts. You remember the outlook back and the hub has deteriorated since, and there's a lot of logistics implications. So it's not done.

But I think having settled both in a positive way, plus the good performance of what we call the high-value segments that Claudio referred to, which are LNG, trading and commercial, that together, has enabled us to revise the guidance on EBIT.

On the cash flow, the guidance is even greater because of what Claudio said and the take-or-pay reduction, which is really a factor of all these things together. Looking forward, the effort is going to be to bring all the contracts to hub levels. So it's not hub indexation.

It's hub level, the 2 outstanding ones, of course, being the North African, Algerian and Libyan ones, which have to be done in the coming months. So that's really what's between us and the target of getting to 100%..

So downstream, refinery and marketing that now we are referring today -- what we are doing in refining. I think that you follow the Italian newspaper -- I don't know if you have the opportunity. Yes, I follow it and very closely. I think that we -- for the first time, we really start a strong and determined action to change something.

It's -- we don't want to run away or leave this decided. And we want to do something differently. And we don't want to lose money, and hopefully, we are alright to make money. So we start with Gela. We have a plan for all the different refinery. There is a very important plan that is a transformational plan.

We start -- we've already done something in Venice, and that is doing positively. We wanted to do the same in Gela with the transformation. And what we are doing is linking the downstream restructuring with the upstream opportunity.

We have a big, important -- or big or less big opportunities in Sicily or in other countries, and we -- and that help us to shift people after the right training. But in the downstream, we're already using a lot of people from the downstream in the plant. They are very knowledgeable and capable and very effective. So we are moving.

So we don't impact the labor. And we transform the oil in Green refinery, oil in depots, in storage facility, where we can import and we can export. And that is a part of the strong action. It's clear that abroad, we have some refinery. There's more refinery. We have still 2 refinery. We have a plan to sell out these refineries.

So we really want to reduce our exposure. That is not very -- it's not very big, but we are losing a lot of money. So we really -- we are really determined to go ahead. We -- today, just 1 hour ago, I think after 2 days of discussion with the Minister of Development and with the unions, we signed an agreement, a very important agreement, in Rome.

And that is a -- I think that is a very important agreement because all the parties accepted to sit down and discuss our new plan that will start with Sicily. It's very positive for the region. It's very positive for the workers, for the labor. And especially because we can -- we are going to invest in something that, through which, we can make money.

And that is good because we have development also in the region. That is the first step. It was not very easy to reach it, and then we start negotiation of each single project. And then we are going to continue.

When we talk about the breakeven, it's a combination of breakeven or refining, where we are reducing capacity, so reducing losses and marketing. We are optimizing also the marketing, also the retained oil. So that is a combination, but we really -- we are really very focused every day..

Peter Kemp from Energy Intelligence. I had a question about Mozambique. You just mentioned farming down your licenses to increase cash flow, and you still have 50% of Area 4.

I was wondering what your eventual and optimum stake in that block, what it is you're targeting? In your strategy briefing earlier this year, you outlined various FLNG projects for Mozambique. But there was no clarity on your proposals for a land cited energy train.

Just wondering what you're planning on the land sites at the moment and what the LNG -- FLNG picture is at this stage? And finally, on indexation, you had indexation with Anadarko on the early -- you had indexation with Anadarko on the Prosperidade, Mamba discoveries.

I was wondering if there's further indexation to do further south on block?.

Okay. So I'll answer you about the first question, about the M&A part. So we -- our position is to be operator with a 30%, 35%. So we have the possibility to farm out between 15% and 20%. That was the plan for this year, but because we don't need cash at the moment. We always need cash, but I think that we try to optimize our -- the value of our assets.

We are close to take the FID. So the FID for Coral is expected in December this year, 2014. So we'll move again on the farm-out after the FID. So now Roberto can give you some detail about the project and about the unitization and the rest..

Yes, well, let's talk firstly about Coral, the non straddling reserves. We are running a competitive FID exercise for the floating LNG with 3 major consortia. We have already submitted to the authorities the plan of development. In terms of contracts, this development will be under the petroleum agreement.

So there will be no need for special regime and, as Claudio said, we are targeting December for FID. About the onshore part. The onshore part, actually, is for the straddling reservoir. I mean, the reserves we are sharing with Area 1. I mean, Area 1, the name is Prosperidade. In Area 4, as you said, is Mamba.

We agreed with Area 1, a draft to unitization agreement. We have agreed the master depletion plan. We have also agreed with the authorities that a draft of admin [ph] legislation and decree-law because of the straddling reserves will be developed under a special regime.

And about the project itself, just yesterday, we have issued the main tender for the EPC contract. That's for the construction of 2 train, 5 -- plus 5 million tonnes per year, with results expected the second quarter 2015. So for the straddling reservoir, we are targeting an FID basically in the second half of 2015..

That is 2 trains for Eni plus 2 trains for Anadarko?.

Right, right. We have also agreed with Anadarko, the layout in the Fundy Bay to locate our 2 trains..

Thomas Adolff from Crédit Suisse. I've got 3 questions, please. Firstly, on your production guidance for next year. I was just wondering what sort of contingencies you have in place or whether they're any different to your prior plan.

And second question, I guess, just sticking with Mozambique, just wondering what progress you're making on the MOUs for the offtakes, if any? And related to your potential partial monetization, I guess, it will have to be at the Eni East Africa level since, I guess, CNPC has a stake in the subsidiary rather direct stake.

And almost certainly, CNPC doesn't want to be diluted.

And the last question I have is on Iraq, and I guess, I asked you on the first quarter call what your view is on Iraq and you said, "I'll give you a decision a year from now." Has that changed?.

So production, you want to talk about production for next year or shall I talk?.

Well, first of all, we confirm the guidance. Next year, we will have a significant project coming onstream, accounting for 150,000 barrels a day. So we confirm the guidance we already gave you. And about 2014, as you know, we have almost flat production between 2013 and 2014.

So this is the scenario for production, with further contribution from new projects -- from the pipeline of new projects..

The question was on contingency..

Libya, Nigeria. We are considering Libya, Nigeria basically at the same level we have this year, considering that Nigeria is producing around 120,000, 130,000 barrels, clearly affected by bunkering and sabotage, but we are focusing on offshore and particularly in the deepwater, where we are getting very good results from our Abu field.

And about Libya, our present level of production is in the range of 2,030 to 2,050 [ph] barrels a day mainly on the western region because our Abu-Attifel field is still shut in, and we consider that this situation will stay also for next year, this is the assumption we have for next year..

Mozambique? Mozambique, taking it from your answer [indiscernible]....

Mozambique -- well, Mozambique, we are working with Marco to talking to the buyers, in particular in the Far East. We have, clearly, priority for Coral because of an FID late 2014.

Marco, maybe you can say more about the [indiscernible]?.

I think there's a lot of interest and excitement in the area for LNG in general but for this project in particular, so we confirm the previous target of having binding agreements in place, at least, for Coral by the end of the year..

And as far as the disposition of additional stake in our Mamba project, I will say that the disposition of shares in East Africa will be, I would say, the easier solution in front of us. But I will say that, potentially, there are other solutions in place. So I cannot say anything specific on this aspect..

So the last point about Iraq, we are -- about our projects in Iraq, we are not really happy about what's always going on. So we didn't take any decision yet so to pull out from this project. But it's clear that it's becoming more and more difficult.

And the main project is -- problem is not security, it's the problem that we are not really proceeding as we scheduled. So we reduced our people for security reasons. But I think that it's really we are thinking about the future. The production level is good. It's about 340,000 barrels per day. But we need water injection.

If we are not able to have water injection in place, we cannot keep this kind of production level. We have to reduce the production level. And that means that we cannot invest anymore. So the main reason is that we need all the different situation in place correctly to go ahead. We're not excited about our project in Iraq..

I would stand up but I don't think I can get out. This is Jon Rigby from UBS. Three questions, 2 on gas. The first is would you, as you approach FID, consider taking any gas, LNG yourselves into a portfolio as part of your sort of growing trading business that you've talked about? I think that's been common practice among the major LNG traders.

The second is, Marco, could you talk a little bit about how you would see the shape of the earnings from your business as it sort of matures over the next 2 to 3 years, so the various contributions and the different activities that you were doing? And then the third question is just 1 thing I don't think has been discussed, unless I missed it, is CapEx and the perimeter around CapEx.

I think you've talked in the release about lower CapEx or targeting lower CapEx for this year. But some of the measures you're talking about seem to me to be either deferrals or complete removals of activities you were envisaging in February.

So perhaps, if you could talk about where you think the sort of trajectory of CapEx versus your previous plan is..

So on the LNG, I think our preferred option at this point is to go and sell the gas. But we always retain the opportunity to preserve some of the gas, particularly, the Coral gas. It's 2.5 million tonnes, so it could -- part of that could nicely fit into our portfolio without significantly changing the risk profile.

Regarding the shape of our earnings, we don't disclose specific lines. But in a ballpark, as we say, we target to have a gas take-or-pay contracts in line with the market. So put that as 0. We do have, as we disclosed in February, some logistics costs as the volumes declined and the ship-or-pay commitments remain in place.

You have some costs associated with that, unused capacity, which is a negative. And on the positive side, the way we look at the business is retail, trading, LNG and B2B. And so those are the high-value segments that Claudio referred to.

So as we target to have the contracts at 0 by the end of next year, then we'll have a negative on the logistics and positives that overcompensate that on the high-value segments..

CapEx, so CapEx has been -- what we've done at the very first -- you're right, we postponed some projects. But really, the work we are doing on CapEx is quite -- is more sophisticated, more analytical work because we are restructuring some projects in terms of modernization.

We are phasing some projects, so we are practically starting with the early production, creating less [ph] cash flow and then developing. We started doing that with the more, we can say, risky projects like Dubai or like Perla and [indiscernible], where we treat these projects in different packages with the early production.

So we are doing the same also in the big oil field that we discovered in West Africa. We did this in the Block 15/06, but we are doing that also in an area where we have a 3-phase project with the modularization project. And that is going to have an impact on the final results.

So less CapEx, anticipation of cash flow and the next phase of cap is we're going to do with already existing production to utilize the cost recovery. So we try to avoid any upfront -- big, upfront investments. And that is what we are really doing in a strong retail in our projects.

It's clear that we are really attentive to avoid any impact on the production on the full year plan. The other point that is always linked to the exploration, big stake, we sell, we cash in but also, we're going to reduce our exposure.

So in the new plan, we are considering the farm-out of some project that we try to accelerate but with a lower amount of CapEx because we are reducing our stake. At the very beginning, it's very high. So that are the different situations or reasons why we can reduce our CapEx plan. Downstream? Yes, Downstream and Chemicals, absolutely.

Yes, we made some efficiency in Downstream, that is clear. And also in Chemicals, we already reduced EUR 350 million in the full year plan from Chemicals. And I try to do better, but [indiscernible] ratio is spiking a lot..

Any questions?.

It's Neill Morton at Investec. I had 2 questions. You announced the reorganization of Eni sort of remarkably quickly after you took over as CEO.

Was this just -- I'm interested, was it a Claudio Descalzi decision or had it been in train for some time and, indeed, will it be, if you like, the final step in Eni's evolution since its IPO in the middle of the 1990s? And just secondly on Kashagan and the replacement of the 2 pipelines, who will end up putting the bill for that work?.

So the first point, the organization, it's clear that it's been my decision because I did it. So it's clear that -- not my wife, it isn't anybody else. And -- but it's clear that it's something that grow up in the sense that the E&P business is 95% of our revenues and 115% of our EBIT.

So it's clear that we have to -- we needed to transform our company. We did also because of the general context. We need a shorter company, more flexible company to increase communication with all the people and to be more flexible to avoid or to overcome all the different horribles that we have in front of us.

And we need a team, a very, very close team in a company that is not a group of different companies, but the management team is very close around the companies. So we changed it completely. But it's also -- we changed because we needed to change. We are not more the company of 2005, 2004 with the different business going very well.

The situation changed. The gas changed, as direct gas is not more there. Refinery is losing money, Chemicals is losing money. We had to react. And to react, we had to change our culture. To change our culture, you have to create a big anomaly. And the anomaly, is the company, the organization and the management team.

For that reason, I do this decision, I..

Kashagan?.

Kashagan, I didn't take any decision about that. But I think that -- who's going to pay the bill? From a contractual point of view, every cost that has been -- yes, that we add after the first oil, after -- before the commercial production is closed [ph], the joint venture. That is clear.

And we have to understand which kind of the perimeter because we are also spending the money for the development because we are to continue the development, drilling the wells, so that is out. But for the pipe itself, normally, from a contractual point of view, is at the expense of the joint venture. We don't have contracts or any penalties.

So that is a -- but the penalty itself is really to pay the bill for the pipeline. So that is the answer..

It's Nitin Sharma from JPMorgan. Looking at the cash flow from operations guidance, maybe you could just throw some light as to how much of this improvement is coming through from the underlying major [ph] resumptions? I see rent is clearly is going quite positively in terms of those assumptions, and that must be helping.

So maybe some light on that? And probably, Marco, you could throw some light on the declining spot prices and what we've seen in terms of Europe in gas prices.

How does that play out for your renegotiations and going forward now that you would not have hub linkage but prices that will be closer to hub? So if there is a fluctuation, how does that kind of play out in your earnings?.

So as far as the contribution in terms of cash flow, definitely, the strong flow production in E&P will represent the baseline, together with the increase. We are projecting by 3%, as we said, in 2015, starting from 2015.

Second, the Gas & Power evolution, from a contractual point of view, that we said and we outlined and we gave out some additional contributions in terms of recovery of prepaid gas. And third, the -- I would say the shutdown of up to 50% of refinery capacity.

At the same time, we'll free some cash trapped working capital in terms of oil in place, that will be free as we shut down the capacity. And then in this projection, we are assuming a recovery that's reasonable in cash contribution from Saipem. And even the reduction in losses from the Chemical business.

That is our -- in good order, the main elements of this contribution..

So talking about the hub changes and the impact on the take-or-pay. Last year, we had 100% oil indexation. And so the 30% reduction we've seen in hubs would've resulted directly in a hit to the bottom line or at least in extra purchasing costs. Now we have 60%, and so that's hugely mitigated.

And as we target the 100% going forward, we will be floating around the hub. We have had, on the sales side, some contracts that were not hub linked to support that transition. So that's why you're seeing, overall, a smoother ride than if we had taken the full hit..

Any other questions? Irene..

Irene Himona, Société Générale. Just, if I may go back to the efficiency program, the EUR 1.7 billion of full year cost savings. You described it comes from simplification and centralization and so on.

Can you say how many people are actually involved? So by the end of the full year plan, what is the headcount reduction going to be? Because I imagine that is part of it..

There is no head reduction that is now coming from a reduction of our people. It's coming from other different services, general services, IT, sponsor-ization and duplication of staffs that we had and now we are using in a different place. So we are not reducing our people. We are netting, so we are balancing our people in different businesses.

And that means that we are reducing the employment maybe in some area because we are able to free up the resources from this exercise. So we are not going to dismiss anybody. We are going to dismiss costs and huge risk activities..

It's Jon Rigby again from UBS. 1 other question I had. I noticed as I was looking through your release that if I look at the dividend you announced and the EPS number you reported, it's effectively 100% payout ratio, I think, for the first half of the year. So Claudio, I mean, you've now moved to the board level.

So could you tell me was there a pause for thought about that situation? And the thought process about what an appropriate level of payout should be.

And in particularly, I guess, because the nature of the company is also evolving, right? So this is a legacy dividend based around the company that will -- which looked very different 3 or 4 years ago to the way it will look like in 2 to 3 years.

So I just wondered -- I know you reiterated it, your confidence in the dividend, but maybe you could just talk about that in your role as a director of Eni?.

So I can tell you what I told my board -- and here, we have also our President and 1 of the directors that are in front of me. And what we -- what I told to my board and to the Chairman, we show the cash flow and the EBITDA profile in the next full year. This year, that's the payout of -- so the level of today is not accessible.

But I think that with the program that we have in terms of EBIT result and cash results, so we confirm our guidance. We have a strong number of action, very robust. By the end -- in 3 years' time, by the end of the plan, we reach a level that is going back to the acceptable leverage -- level, sorry, average.

So we leave with something that is about 58% that is an acceptable level of payout. And so -- and we did that in a very analytic way with all the different components at the corporate level. So -- and after these figures, the board accepted. I made the recommendation to go ahead.

And in the board on mid-September, I'm going to ask the approval for this dividend. But I think that it's being done on the basis of the results of the last 2 months of the new program and the -- all the different components that we in Gas & Power, in E&P, in R&M, in Chemicals, in the restructuring of the cost of the Corporates.

That has been done not only to pay the dividend but really to ride the level of the cash flow and the efficiency of the company. So I think that we are quite sure that what we propose is sustainable, not just for this year but for the long term..

It's Thomas Adolff from Crédit Suisse again. As I look at your E&P portfolio, I mean, your exposure is predominantly to conventional plays, which is a conscious decision you made a number of years ago. You've got a little bit of LNG. You've got gas value chain.

How does shale play into your thinking over the medium to longer term as a major oil company?.

As a major oil company, I play the same role that I played just 2, 3, 4, 5, 6, 7 years ago. So it's still out. In terms of traditional of North American shale gas or shale oil -- at the moment, shale gas more than shale oil. What we continue, what we are continuing is to work in the country where we are for the unconventional.

We have unconventional block in Nigeria. We have unconventional block in Pakistan. In Indonesia. So we have some unconventional blocks. We are working on it at the exploration level or production level, like in Pakistan. But we want to do something sustainable.

And in terms of activities and in terms of costs and so where we have facilities, we're already drilling conventional risers. And we have also in the proximity or underneath, we have unconventional, like we have in Algeria and in Pakistan. We can optimize costs and we can do something that is sustainable.

I -- we think that we have found -- and we are -- so many conventional assets that we prefer to continue our strategy. And the strategy is still to reload -- and we are reloading our portfolio on the base of a conventional asset, oil and gas.

Now we are more oriented to oil plays in West Africa, and not only in West Africa; gas play, more in the Pacific. But that, too, will be also the future..

It's Mark Bloomfield from Deutsche Bank. 2 questions, please. Firstly, on the restructuring plan in Refining & Marketing. You've talked about cash breakeven by the end of 2015.

I wonder if you could give us a sense of the kind of upside as we look ahead to 2017, if you're successful in delivering that plan? And second question, just thinking about your success with exploration in the pre-salt West Africa.

I think you've indicated that there'll be some early production potential by 2015 but again, perhaps, you can give us a flavor of where you see that going 2016, 2017? And what's baked into your 3% production growth aspiration?.

So we start with the aspiration, so we can give the opportunity to Luca Bertelli, the head of Exploration, to say something about what he's doing..

Exploration, we have the successes in pre-salt plays in West Africa. And now the focus is in developing the oil that we discovered in Marine XII, Nenè Marine. We have already first production coming at year end from Nenè Marine. And as Claudio said, the Nenè Marine will be developed in phased approach.

So we will see 2, 3 phases of development of Nenè Marine. The field still need to be fully appraised because now we consider that we have 1.2 billion barrels of oil in Nenè Marine. But there is still further potential for upside. So this is the focus on development of oil. Gabon, the well is just finished now.

It's a nice discovery, very thick hydrocarbon column. It's gas and condensate, it's not oil. And we need to apprize, and we will do very soon, as far as when we find a proper rig for apprizing and testing the field. So this is the short-term plan for West Africa pre-salt discoveries..

Now to be clear, we already found the rig. He doesn't know but we found it. So for Refinery and Downstream, I think that the context is we try to go -- we'll go to breakeven. It's clear that the context is very -- especially in Europe, is very difficult. And I think that is continuing to be difficult because we don't have the right conditions.

So the fundamentals in terms of gas price, oil price, facilities, regulation, time to market, so I don't think that the Refinery business will be the future for us or for any other European company. So what we have to do is really to reduce our losses, get to breakeven and continue our optimization. But we won't reduce capacity to reduce losses.

What we can do is to reduce additional capacity. I think that with the level that we plan now, we can reach breakeven and maybe make some money. But the refinery system in Europe remain really difficult for the reason I told you..

Under pressure..

He said under pressure..

It's Chris Kuplent from Bank of America. I'll start with the boring question. The restructuring for your efficiency program and the refinery capacity shutdowns.

Can you give us an idea, for both items, whether there are significant upfront one-off costs that you have already budgeted for the next few years as you're fixing both those items? And the second question, back to the topic of dividends.

We're looking at roughly EUR 4 billion, EUR 13 billion of CapEx and you're telling us about a EUR 15 billion operating cash flow number. So it looks to me like that's still not quite enough.

Are you effectively arguing we'll get there by 2017? And surrounding that question, maybe you can also comment on buybacks, scrip dividends, other flexibilities you see around shareholder returns?.

So I will answer about the upfront costs for the efficiency program and the refining restructuring, then Massimo will answer about the rest. For the efficiency program, we don't have a lot of upfront cost. We already started. We already got EUR 250 million.

I think that we have some costs, clearly, to optimize but are quite marginal and will start in 2015, so next years. For the refinering, we have to -- so we are shutting down. It's clear that we have costs for abandon and we have costs for investment, and that, we don't start before 2015 second half.

And we'll be more clear about the profile of this cost at the next strategy presentation..

Okay. As far as the cash flow, you did the calculation right. So what we talked about this afternoon was an average of EUR 15 billion in 2014 and '15. But we mentioned the 2016, '17 level that for the time being remains, as we said during last Strategy Presentation, that will be in the range of EUR 16 billion, EUR 17 billion.

So it means that reaching this final target means that definitely, looking at the, I would say, the real cash flow from operation, less the level of CapEx that, by the way, this year is projected to be in the range of EUR 12.5 billion, that could be in the of EUR 13 billion all along the full year plan.

We will help us to cover completely the dividend. On top of this, let me remind what Claudio already said about the exploration potential contribution to this result.

If we dispose of some interest in some of the recent successes we got in Exploration that are far above the level of development that could be sustainable in our organization and without affecting the 3% production increase, we are keeping on promises. This contribution could help us, really, as it would be a contribution from operation.

Because what we are doing is just to anticipate part of the future contribution, if the price will be the right one, definitely, as we did when we disposed of the interest in China. So that's -- to the Chinese in Mozambique, sorry. So this is the scheme. So sustainable. Sustainable, by definition, without any additional efforts, by '16, '17.

If we include this kind of industrial contribution from partial dispositions, Exploration would be sustainable even in 2014 and '15. We thought about the scrip dividend, but the scrip dividend, in case, would be saw as an opportunity for our shareholders not, I would say, a solution to avoid a cash payment of the dividend.

That's how I felt on this respect. And third, you mentioned, again, the buyback. That buyback, we would like to retain a high degree of freedom and decided the level of buyback, and so I'm not ready to share any kind of guidance on this respect..

The last question from the floor, and then we'll take a question on the phone..

Christyan Malek from Nomura. Getting back to Saipem, just 2 question, if I may.

First of all, in the options that you consider around the strategic review on Saipem, would that be -- would that include a placing of the stock into the market and/or a breakup of the business? And secondly, given the pressures facing the services sector, arguably, what sort of time line would you consider around that strategic review? Would you consider delaying it if the price wasn't attractive enough?.

So I told that we are at the very beginning of the process. So we don't have any strategy now for the future. It's too early. But it's clear that never and ever and never break out the business, that is not our role.

We are a shareholder, we are going to sell the stake in the future, we are going to understand how we're going to do that and we want to maximize, I repeat, the value for Eni and the value for Saipem. So for sure, we don't want to break out the business..

Sorry, can you repeat the last question?.

Do the options that you are considering include a placing of the stock?.

Definitely, Claudio said that we are at the very beginning, so we are not ready to share any kind of potential solution for the future..

Okay. I think that we can have a few questions on the phone..

Question from Mr. Roberto Letizia from Equita SIM..

Again, on Saipem, please. You answered already to some topics, but maybe you can spend a few words about the financing that you're getting to Saipem. So what's going to be the attitude of Eni towards Saipem for its financing in the next month? Given the decision on what -- the stake. And then a question on the Gas & Power.

Clarification on the breakeven at EBIT for this year already. Can you repeat to us or remind us, please, what are the -- eventually, the retroactive impact that you're accounting for this year within the breakeven number you're mentioning? And then again, a final on the Gas & Power again.

But the fact that you're going to be 100% hub linked in the future for your gas procurement, is that going to change also the marketing strategy for the future in selling gas, meaning that you will no longer go to fixed price 2-, 3-year contracts, but you will floating also on this change in the policy?.

So the answer on Saipem is very, very, very short and fast. And I'll repeat what I said before. We are at the very beginning, so I don't want to talk about something that we are still under evaluation. Then, we can talk about Gas & Power.

Marco?.

So you should assume there's about EUR 0.5 billion of retroactive and this is a combination of various contracts and various things in this year's results. The pricing structure is really driven by the clients. And so I think we're in a point now where we price more of our sales contracts links to hub than the purchasing contracts are.

I think the good news with moving to the hub indexation is we have the flexibly now to sell on the hubs themselves. And as you see in our half year and quarterly results, our sales at the PSV, the Italian hub becoming finally a real liquid hub, really gives us that extra flexibility that we didn't have before.

So overall, you will have a greater percentage of sales price at the hub as well, but part of that is going to be a result of direct sales at the hub..

Okay. I don't think that there's any more questions. Yes? Okay. Thank you. Thank you very much for your attendance, for your questions, and this -- the Strategy Presentation Update is finished. Thanks..