Eni (NYSE:E) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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The full earnings call is available at https://www.eni.com/en-IT/investors/forms/2026-second-quarter-results.html
Summary
Eni reported strong Q2 financial performance with 5.4 billion euro pro forma EBITDA and 2.3 billion euro net income, both doubling year on year, and a 4.5 billion euro cash flow from operations, up over 60%.
The company highlighted its resilience amidst geopolitical volatility, focusing on geographic diversification and proprietary technologies.
Key strategic initiatives include expanding in Asia and South America, enhancing low-carbon energy platforms, and executing major upstream projects.
Notable operational success included 8% reported production growth, with new exploration successes in Angola, Côte d'Ivoire, Libya, Egypt, and Indonesia.
Eni raised its full-year cash flow from operation guidance to 15 billion euro and plans to repurchase 3.4 billion euro of shares, with a potential special dividend linked to oil and gas prices.
The company emphasized a dual growth strategy in traditional and low-carbon energy, with a robust project pipeline and strategic partnerships, including a joint venture with Mercuria for trading.
Eni addressed ongoing negotiations and potential new contracts in Venezuela, while also enhancing its infrastructure and refining capacities.
Full Transcript
Francesco Gattei — Chief Transition and Financial Officer
Thank you. Good morning. Good afternoon for being with us today. Our second quarter and first half result clearly reflect our successful execution of the strategy and the objectives we have consistently communicated. In Q2, Eni generated 5.4 billion euro pro forma EBITDA and 2.3 billion euro net income, both doubling year on year, and 4.5 billion euro of cash flow from operations, up over 60%. This growth significantly outpaced the increase in Brent prices over the same period, demonstrating the strength of our operating leverage and our ability to absorb a highly unfavorable foreign exchange environment.
Looking at the first half of the year, we delivered a remarkable 40% year on year increase in pro forma EBIT. Reported gearing remained stable quarter on quarter, while pro forma gearing declined to 10%, reaching the lower end of our target range. Overall, this performance reflects excellent operational execution, effective capture of market opportunities, and the continued delivery of our consistent strategy. The first half of 2026, marked by the emergence of a new crisis in the Gulf, has once again exposed our industry to extraordinary volatility.
Yet Eni has demonstrated its ability to effectively mitigate external pressures. Our resilience is underpinned by a broad geographic diversification, strong operational efficiency, and the deployment of proprietary technologies. At the same time, our robust organic growth continues to be fueled by our outstanding exploration successes and a deep pipeline of developing opportunities. Most importantly, our growth is increasingly multidimensional. While exploration and production remains our highly competitive core business, we are rapidly scaling attractive growth platforms right across the energy value chain.
Specifically, I would like to highlight three key pillars of our strategy. First, diversification. We are well diversified across geographies, businesses, and technologies. While some of our operations have been affected by events in the Middle East, the overall impact has not been material. Actions taken in 2026 have further strengthened this diversification, increasing our exposure to Asia and South America, expanding our transition-related businesses, and opening new opportunities in trading activities, critical minerals, and stationary batteries.
Second, growth. We continue to deliver a unique double engine of growth, combining industry-leading organic upstream production with a rapid parallel expansion in low-carbon energy. Third, financial performance. We continue to generate outstanding financial results, with over 60% of our original plan targets already met year to date. Also, thanks to the fast time to market of our project, our satellite model, increasingly acknowledged as a material positive differentiator for Eni, continues to de-risk the balance sheet, attracting third-party capital to fund our expansion across new technologies and geographies.
Turning to upstream, we delivered an outstanding 8% year on year reported production growth in the first half of the year, or 11% underlying. We fully offset Middle East volume losses thanks to the efficient execution of major operating projects, including AGO in Angola, Amoca in Mexico, Congo LNG Phase 2, as well as a strong contribution from World Energy. This growth is entirely organic and reflects investment and exploration successes achieved over several years.
As discussed during Q1, our unique to 2026 exploration performance has added over 1 billion barrels of new resources, supported by credible development pathways. This success is driven by key discoveries including Al Qaeta 01 in Angola, Muren South 1 in Côte d'Ivoire, two offshore gas discoveries near Bar Es Salaam in Libya, the Dhimi's discovery offshore Egypt, and the giant Galiga 1 gas condensate discovery in Indonesia. We have further refreshed our future pipeline with new acreage positions in Uruguay, Timor Leste, and the Gambia.
Furthermore, to secure our medium-term production capacity during the planned period, we have sanctioned three major projects: Balen Phase 3 in Côte d'Ivoire, Genk North in Indonesia, and Kronos in Cyprus. Beyond this project, we are reshaping our global footprint through the build up of two diversified regional clusters in Asia. The Sierra business combination completed in June created our largest satellite platform to date and established a leading player in the Pacific region.
Initial production exceeded expectations, surpassing 300,000 barrels per day and backed by 3 billion barrels reserves. Upside, it has a clear path to approach 800,000 barrels per day by 2030. In the Americas, we continue to advance significant opportunities in Argentina and Venezuela, which together with our existing position in Mexico and the United States represent an increasingly important component of our upstream portfolio. In detail, in Venezuela we are finalizing a negotiation for new contracts for Junín 5 and CoroCoro.
Simultaneously, we have finalized the gas export agreement for the giant Perla field. Collectively, our footprint in Venezuela unlocks an outstanding growth potential, more than 5.5 billion barrels of recoverable resources. Meanwhile, in Argentina, our newly consolidated assets hold an exceptional 25 Tcf of gas equivalent to 4.3 billion barrels of recoverable resources, plus an additional 500 million barrels of condensate, bringing total gross recoverable resources in the country to 4.8 billion barrels.
The new material initiatives in Argentina, Venezuela, East Asia, together with our African portfolio provide absolute confidence in our long-term trajectory. As a result, we now expect production growth to be around 4% CAGR guidance through 2030, while we are also developing a unique visibility on a further wave of growth opportunities beyond 2030. Importantly, through portfolio high grading and strategic moves like our recently announced Mercurial joint venture, this volume growth will translate directly into cash flow, underpinning our primary target: growing our upstream free cash flow per barrel by more than 50% by 2030.
Our Q2 results demonstrate Eni's ability both to capture favorable market conditions and to enhance underlying profitability. E&P delivered outstanding production growth and successfully captured the benefits of the market environment, with particular strong contributions from Norway and Congo. GGP generated pro forma EBITDA of 0.47 billion euro, confirming better-than-expected performance and supporting a further increase in our EBIT guidance to over 1.4 billion euro.
We also see additional upside potential in the second half supported by current pricing conditions and inventory replenishment dynamics. Plenitude and Enilive together generated 607 million euro pro forma EBITDA in the quarter and 1.1 billion euro in the first half, supporting an increase in full-year guidance to 2.6 billion euro compared with the original 2.4 billion euro. Within transformation businesses, refinery utilization recovered following the major turnaround activities completed during the first half.
Versalis also continued to reduce losses in line with the improvement plan, also supported by better market conditions. Contribution from associates benefited from supporting macroeconomic conditions and the consolidation of Sierra from June onward. The first half tax rate of approximately 39% was below our full-year guidance, reflecting the impact of high grading upstream production, the accounting impact of satellite, the transition toward a more sustainably diversified overall income mix, and the benefit of our restructuring and performance improvement initiatives.
Cash flow from operations remains strong, supported by dividend contribution from associates and continued working capital improvement. Operational working capital generated a positive contribution in the quarter, and we continue to expect an overall reduction throughout 2026. Capital expenditure amounted to 1.8 billion euro in Q2, and we continue to expect approximately 7 billion euro of gross capex for the full year, while we also reduced the net figure to below 5 billion euro.
We paid the fourth and final quarterly dividend related to 2025 and repurchased 600 million euro of shares. Since 2021, outstanding shares have been reduced by around 18%. In light of the raised guidance for CFFO to 15 billion euro, we now expect to repurchase 3.4 billion euro of shares in the 2026 program, representing a combined yield to our investors of around 10%. Pro forma gearing at the quarter end remained at 10%, the lower end of our target range, and we expect reported gearing to converge toward that level by year end.
In conclusion, the combination of our upstream positioning and growth outlook, our integration across the entire energy value chain, the increasing value creation from our transition businesses, and our strong financial foundations position us competitively in a world that has entered a new energy paradigm. It is confirmed by the revised guidance for most of our businesses that translate into an increased distribution underlying oil and gas production.
Growth is now seen exceeding 5%, above the upper end of the previous range. GGP pro forma EBIT is raised to over 1.4 billion euro, plus 40% compared with the initial level. Eni performance adjusted EBITDA is revised up by 18% at 1.3 billion euro, and at a revised scenario of 85 dollar per barrel Brent, adjusted CFFO is expected at 15 billion euro, determining a higher buyback of 3.4 billion euro. The new buyback represents a 127% increase over the initial guidance of 1.5 billion euro at the budgeted cash flow.
The potential special dividend related to oil price above $90 per barrel or gas price and serum margin more than 50% of the original budget's assumptions will be determined in the last quarter. In this environment Eni is in one of the strongest positions in its history. That concludes my remarks, and together with my colleagues from Eni's management team I am ready to take your question. Thank you.
OPERATOR
Thank you. This is the conference operator. Please press star and one for your questions and star two to remove yourself from the question queue. I now leave the floor to Mr. John Rigby for the Q&A session.
John Rigby — Investor Relations
Thank you, and thank you everybody for attending. We're going to go through this in polling order again. I'd ask you to keep your questions to two, if that's okay, and we'll aim to finish the call around the top of the hour. We'll start with Alejandro Vigil at Santander. Alex?
Alejandro Vigil — Analyst at Santander
Yes. Thank you for taking my questions. The first question is about the guidance about production. Definitely this year looks very strong also with the Sierra consolidation. If you can give us numbers about the outlook of 2030 of production, just to have some indication of the range of potential volumes that year. And the second question is about the European natural gas market. You mentioned that in the guidance for global gas and LNG you are not including any upside from the current situation.
If you can elaborate about how you see the second half of the year. Thank you.
John Rigby — Investor Relations
Thank you. For production outlook, I think Guido will take over that question. Is Christian there to give you an update on gas in the second half, as you asked?
Guido Brusco — Chief Operating Officer, Global Natural Resources
Yeah. So on production, of course you notice that we have improved our guidance in 2026. Originally we provided a range of 3 to 4% growth underlying, which now increased to 5%. And this is coming from a higher contribution from some country like Libya, Mexico, Kazakhstan, and of course the anticipation of the business combination in Sierra. While for the 2030 we have also provided a stronger support to our originally provided guidance. And you have noticed that we have accelerated some major FID.
We have included some projects which initially were beyond 2030 and that we have now anticipated to the 20.
Claudio Descalzi — Chief Executive Officer
So just to give some more color on our production, if we look at all the projects that were in our slide, we have 54 projects. They're coming from our organic growth, our exploration, something that is coming from the exploration we performed in the last 10 years. And most of these projects are already in a very advanced stage. Some we took the FID, some are really in execution and most of them are with the POD done. So that is going to give the 4% we said by 2030 and is going to confirm a solid growth also after 2030.
So when it comes to the gas market scenario for the second half, I would say our scenario is currently in line with the forward curves, as you can see. But I think we can say that the situation is fairly fragile given the geopolitical situation and, let's say, delay in the replenishment of the European storage. So we think that depending clearly on the evolution of the situation, we can see upside potential in terms of volatility and flat price numbers when it comes to the second half.
And I think the idea is that we are ready clearly with our assets to take advantage of that situation. That's it.
John Rigby — Investor Relations
Thanks, Alex. We can now move on to Biroj Bhagataria at RBC. Biroj, are you there?
Biroj Bhagataria — Analyst at RBC
The first was just on Venezuela, which you touched on in your initial remarks. There were some reports recently that the government had presented new terms to the industry. I was wondering if you thought those were sufficient to drive investment beyond 2027 and 2028 and see more on the oil side than the gas side. And then the second question is just on refining. The strength in the downstream has been a big theme this quarter. I know you don't have a huge amount of exposure to this, but I just noticed your indicator was down quarter on quarter.
I guess we're looking at the cracks on the screen which are very strong. So could you just help me understand, you know, why you're not able to take advantage of that and how we should think about that kind of going to the second half. Thank you.
Claudio Descalzi — Chief Executive Officer
So Venezuela, now, if maybe Guido can complement what I'm going to say. Venezuela, we are in negotiation, I think very, very open, clear and transparent. Very good negotiation. We are discussing very well with the Minister, with PDVSA, clearly also with our American partners. And you know, we have big potential, as we said, we have one of the best blocks. We have Corocoro, we have Perla, for which we already signed a contract that has been very, very, very quick.
A couple of months ago we signed a contract for export that is very good because it's going to complement our domestic production and that gives even more breadth and more space for future investment. As you know, we already developed most of the infrastructure for the second phase. So we can really go fast for the second phase and then put in place a floating LNG for export. So up to now Venezuela is responding very well. Clearly we are going to negotiate a contract that allows us to make investments.
We have to remember the history of this country. It's not that we forgot what we had in the past, so we are prudent. But I think that what happened until now is encouraging us to go ahead with our Venezuelan partner, with PDVSA and the Minister. Just to talk about SERM, I like that. Maybe Francesco says something about SERM and then, if there is anything to add for Venezuela or in general for downstream, Pino can add something. And Stefano Ballista, if there is something for the biofuel refineries.
Giuseppe Ricci — Industrial Transformation Chief Operating Officer
Yes, about our benchmark refining margin. Clearly this benchmark is a nominal value that is representing a status that is a normalized status of the market. So it takes into account the crudes that are generally imported in our refineries, takes into account the freight costs that are normally assumed for this transportation and for these logistic events. The situation that we faced since March is completely, let's say, out of normal. So the SERM that you can read in a generic way is not the actual margin that we are able to capture because there are some factors of discount, mainly higher freight cost, higher logistic cost, differentials of crudes that are not matching the original crudes that were included in the formula, different yields. And also there are some hedging factors that weighed because we covered a small portion of the throughput during the quarter because we take advantage of the scenario. Clearly the spike that occurred in the last month is so material that it has limited this opportunity. In general, you have to consider that what you read as an average on a nominal SERM, to be converted in our actual figure, will be with a discount of 2 to 3 dollars per barrel.
Okay, it's very clear. The fundamental is in any case that we have completed all the turnaround in the first and some in the second quarter, and so we are able to maintain the maximum capacity in the third quarter and that means, with this current margin, a lot of results.
Guido Brusco — Chief Operating Officer, Global Natural Resources
If I may, I'd like to complement with some operational information on the gas business, Venezuela of course on the gas business. As you know, in March we have signed a sustainability agreement on Cardon 4 and PDVSA is honoring this agreement, so it is providing cargo to pay the current gas invoices. On the other hand, we are preparing a plan of development for Perla to export gas and the filing of this POD is imminent. On the oil business, as Claudio said, we are at the very final stage of the negotiation and we have also prepared ourselves and we are ready to mobilize, as soon as we sign this contract, rigs to exploit the resources there and make use of the spare capacity that the facilities in Venezuela have to increase production. Of course.
Biroj Bhagataria — Analyst at RBC
Thank you all.
John Rigby — Investor Relations
Thanks, Biroj. We're now going to move to Josh Stone at UBS. Josh?
Josh Stone — Analyst at UBS
Yeah, thanks John, and good afternoon. Two questions please. Firstly on CapEx, thanks for the project list on slide 6, it's useful. If I understand correctly you want to develop these new projects without increasing spending. So it sort of brings up the question of which projects are falling off the list. And I noticed in your release there was some impairment related to a slowdown in more marginal fields. So maybe anything around which fields are more marginal, which geographies are more marginal to make room for these new projects would be useful.
Thanks. And then second question on chemicals. The losses clearly narrowed this quarter but still losing money. Maybe just talk about the trend of earnings, what you're seeing for margins in chemicals and how much of the improvement could be attributed to self help versus the wider macro. Thank you.
Claudio Descalzi — Chief Executive Officer
So for CapEx it's true we are growing and also we demonstrated in the last couple of years that we are growing without increasing CapEx. That means that it comes from at least two factors. One, that we are very effective and efficient in developing fields. So in the last projects, I think in the last 10 projects that we developed, we respected not just the timing but also the budget. So we never exceeded our budget. That is a very critical point in the upstream, especially when you develop deep offshore or floating LNG or other stuff, that you're able to respect time and budget.
Secondly, we, as you know, created a different kind of economic model, a satellite model through which we deconsolidate through the growth component and the value component; their production can justify their investments without really creating additional burden on our balance sheet. And that allows us to go faster and keep a very clean or light balance sheet that allows us to expand or increase our remuneration policy, for example. That is, as you know, our priority.
And that's what we demonstrated in the last couple of years. So it's not a question to delete or write off, as you said, marginal fields. We never write off marginal fields. We farm out through an M&A process that was very successful, through which we got some good income. But I think the two principal reasons are what I said. I don't know if you want Guido to add something; otherwise I pass the ball to Adriano to talk about chemicals and the chemical trend and how we're going to do in the future.
Adriano Alfani — CEO of Versalis (Chemicals)
Josh, thanks for the question. As you were describing, the result in chemicals is improving quarter over quarter. In the second quarter compared to the same quarter of last year, we have seen a major improvement in the range of three digits, above three digits. We need to make a distinction between what is transformation and what is the scenario. As you asked, in terms of transformation, we are performing in line with what we said to the market, that we expect that on a yearly basis we have in the ballpark of 250 million.
And if you see right now the trajectory of results of the transformation, we are a little above this target of 250. Right now we estimate more in the range of 280 to 300 million. Part is also scenario. We have seen an improvement in the scenario in the second half. You need to consider the net impact of the scenario because you know that we are energy intensive or feedstock intensive. So, of course, whatever you have seen in terms of increase of feedstock and energy, of course is higher cost for us.
But we have seen also a shortage in the market, not an increase of demand. This is something that we should look around as a scenario: there is no increase of demand, but there is a shortage of product. Because for six to eight weeks, due to the almost closure, we have not seen import from Middle East. But after eight weeks we have seen an increase of import of the US. So whatever was not coming from Middle East has been replaced. So we are now back to the starting point.
But for sure in the second quarter we've seen improvement of the scenario. To the last part of your question, how much is this trajectory going forward is based on what we declared to the market. We expect to continue to improve performance due to transformation. The improvement on a yearly basis for coming years is a 50% transformation, 50% these new platforms, more or less.
John Rigby — Investor Relations
Thanks, Adriano. Thanks, Josh. We're now going to move to Alessandro Pozzi at Mediobanca. Alessandro?
Alessandro Pozzi — Analyst at Mediobanca
Yep, thank you for the questions. The first one for Claudio, and going back to production. Of course you have a lot of production coming to 2030, but if you add all the other opportunities that you have in Cyprus, additional upside in Indonesia, Argentina, Venezuela, it looks like the potential for underlying growth is very large, even beyond 2030. And of course there's always the need for disposal. But putting disposals aside, what could be the potential underlying growth of the portfolio that you have today, looking into the middle of next decade?
And the second one kind of follow-on disposals. Can you give us an update on the disposals that you expect in the upstream? Maybe Indonesia as well — there's a bit more to be sold there — and also on the scope of the agreement with Ares in the upstream. Thank you.
Claudio Descalzi — Chief Executive Officer
Thank you for your question. Clearly next year we are going to have an update, but what we said now, and I just said, is that up to 2030 it's 4% growth; after 2030 maybe it can be better than that. For sure. I don't think that there is another company that has more than 54 projects for start-up, largely organic, with a very low cost. So we're going to see. Clearly we have to understand, you know, what is the situation. It's very difficult to talk about the end of the year with this kind of volatility with all that's happening.
And it's hard to talk about 2027 also, even if we are really solid and we don't fear anything. But clearly, if you have to talk in five, six, seven years, what is going to happen? I think that we are in a situation where the world needs more energy. That is clear. There is an energy race among the big champions, the big countries, for different reasons—demography, clearly—but also we talk about hyperscale data centers, AI, and the growth rate of the industry that a lot of countries are demonstrating.
So we need energy and now we understand that we need oil and gas. That is clear. And we are really well placed to give an answer to this call, this big call about oil and gas. I don't think that we've ever been so strong in the industry in terms of number of projects and geographies. Because when I talk about 54 new projects, we are talking about at least 13 or 14 different countries. So diversification is a key word—diversification that means that we don't have all the eggs in the same basket and each country is very rich in terms of future growth.
So I can tell you we are in a good position. We are in a good position in a world that really needs energy. They are hungry for energy, starving for energy, and Eni is really in a very strong position—never been so strong. Disposals. I think that I give the floor to Francesco to talk about the status of our disposals.
Francesco Gattei — Chief Transition and Financial Officer
Clearly the plan for this year is almost completed. As you mentioned, we are in advanced stage for the last step—that is the Indonesia 10% that has already entered the last stage. We have completed a number of deals that are pending the closing. We have done the Nigeria onshore disposal. We are running the increase of capital in Plenitude with the consequence in terms of balance sheet. We announced this deal related to infrastructure. So there are various activities.
For the coming years we will continue to maximize the valorization of our portfolio. Our portfolio is a living animal—it's adding opportunities through exploration, through business development, business combination. And this means that there's opportunity to valorize part of that, to reduce exposure to areas or regions that are no more core, or eventually also to improve the valuation of transformation business. So I think that we proved that. I remember the analysts were considering last year as the top of our disposal plan. I think that we also proved that this year we have new ideas to put on the table. I think this will continue in the coming years but will be part of the next four-year plan.
Alessandro Pozzi — Analyst at Mediobanca
What is the perimeter of the infrastructure deal?
Francesco Gattei — Chief Transition and Financial Officer
The infrastructure deal is a partnership that is working on a generic—not a specific set of assets—infrastructure. You know that the upstream business has many kinds of infrastructures. So the idea is not to build or to identify a geography, a field, or something that is well defined, but a broader portfolio and creating a financial synthetic element that simulates the cash flow related to that infrastructure. And this is the way that we created that, as a potential to extract more value from infrastructure that has a fixed return, while we would like to invest in high double-digit returns on our upstream assets.
Alessandro Pozzi — Analyst at Mediobanca
Thank you very much.
John Rigby — Investor Relations
Thanks, Alessandro. We're going to move to Ahmed Bin Salim at ODDO. Are you there?
Ahmed Bin Salim — Analyst at ODDO BHF
Yeah. Hi. Thank you for taking my question. Hello. You mentioned the possible extraordinary dividend review in Q3. What would trigger that decision? And if cash flow remains strong, would buyback still be your preferred way of returning excess cash to shareholders? Thank you.
Francesco Gattei — Chief Transition and Financial Officer
We have set the rules for the excess dividend. So the rules are, if we are assuming in a full year the $90 Brent scenario—currently we are at 91—so we are in the money for the dividend, excess dividend distribution. If you assume the 50% increase of refining margin and $9 is the trigger, we are well above that number, and we assume a 50% on the €36 per megawatt hour—that was the budget for TTF—and €54 means the 50% increase. So we will be above the €54 on average.
And currently we are probably in the range of 47, 48, so there will be an extra dividend. So if we want to, say, simulate with the current level of year-to-date price, there is an extra dividend. We will see in September how the market will evolve, what our expectations are for the end of the year and, clearly, how the company has performed in terms of cash generation.
Claudio Descalzi — Chief Executive Officer
Yes, but what we said, just to specify, is that in October we have to take the decision; we're going to pay the extra dividend in the fourth quarter, so by December, just to remember. And what is going to happen is not—
Francesco Gattei — Chief Transition and Financial Officer
Yes, and just another element: if we are clearly in that situation where there is an extra dividend, you have to consider there is probably also an extra buyback, because if we enter in a higher price, there will be a ceiling up to €4 billion. We are currently at €3.4 billion, but we would saturate the 60% cash flow from operations distribution up to the limit. Yes.
John Rigby — Investor Relations
Thanks, Francesco. Thanks, Ahmed. We're going to move to Michele Della Vigna, Goldman Sachs.
Michele Della Vigna — Analyst at Goldman Sachs
Michele, thank you. And again, congratulations on the strong results. Two questions. First, I wondered if you had any comments on the situation in Kazakhstan around the enforcement of this $5 billion environmental fine on Kashagan. And secondly, could you shed a bit more light on this Mercuria–Eni Global Trading joint venture, what you expect it could contribute in the coming years and whether effectively GGP becomes part of the joint venture? Thank you.
Claudio Descalzi — Chief Executive Officer
Okay. I think for both, for both Kazakhstan and Mercuria, Guido will answer, and maybe I can add something, but I'm sure that Guido covers completely the two questions.
Guido Brusco — Chief Operating Officer, Global Natural Resources
Okay, so let's start on arbitration, on this ongoing arbitration, of course. First of all, let me clarify that the operator and all the shareholders in support—I mean the operations—have been conducted in compliance with the law of Kazakhstan, and NCOC had all the permits required to do so. That's an important element that we always have to underline. However, the Republic of Kazakhstan, through various instrumentalities and agencies, continues to pursue this sulfur fine and has also commenced some enforcement steps, despite, we have to say, there is under the commercial arbitration under the PSA, which is ongoing, a restraining order from an international tribunal prohibiting the Republic to take any measure to enforce the fine during the arbitration, of course. And of course the operator is continuing to challenge this sulfur fine, including, of course, an investment treaty arbitration which is currently ongoing also. So the situation is, of course, ongoing at the moment. They made some steps, but at the moment they are on hold on any other kind of enforcement. And this is the current situation on Kazakhstan.
As far as the trading, clearly this is part of our transformation of the trading business. The trading business initially was more a kind of business service provider in our corporation, then we became more a marketplace player again within the company, and then the third and last step was to merge with a pure trader to combine the best of the two worlds: to combine the variety, the diversified set of industrial assets, the structured supply portfolio of a corporate like Eni—very well diversified, as Claudio said—both in terms of business and geographies with the operational flexibility, the systems of a pure player.
Of course, I mean it is a 50/50 JV and we expect, in the long term, that this JV and the trading activity will help to raise and lift our ROCEs by 1 or 2 percentage points. This is—yeah—and of course the cash flow per barrel and the overall result of the company.
Michele Della Vigna — Analyst at Goldman Sachs
Thank you.
John Rigby — Investor Relations
Very good. Thanks, Michele. We're going to now move to Fergus Neave at Rothschild & Co and Redburn.
Fergus Neave — Analyst at Rothschild & Co and Redburn
Brilliant. Thank you very much for taking my questions—two questions, please. Just first on Enilive, where the results were particularly strong this quarter and it was great to see that feed through to the guidance upgrade. Could you just give us some color on the relative split of the results between the marketing business and the biofuels business this quarter and perhaps also comment on how your biofuel margins have been looking so far in 3Q? And then secondly, just following up from the earlier refining question: the assumption in the scenario for the CIRM has stepped up quite a bit for the second half for the overall number in the full year. I just wondered if you could give us some color on where the new kind of adjusted CIRM has sat or has been tracking so far in July, and perhaps some thoughts on how much of an uplift that might give to the business moving forward in the second half.
Claudio Descalzi — Chief Executive Officer
Okay, so the first question for Stefano and the second one for Pino. Stefano and Pino as well.
Stefano Balista
Yes. No, thank you for the question. Yeah, the quarter has been very strong, and the result has been driven by a step-up of the biorefinery performance. In terms of overall result, out of the €375 million EBITDA adjusted, as a rough number it is around 35–40% contribution from the biorefinery. And this has been driven, yes, by the scenario improvement—significant scenario improvement—but also actually by a very strong performance from the assets.
If you look to the available assets, Shell, Met and Gela, in this quarter overall utilization rate has been above 90%. And then on top we put in place several optimization levers in order to extract all the value available. Moving forward, the situation is going to proceed in that direction. Rationale is given by the fact that this market scenario is underpinned by an increased demand. Demand for 2026 is foreseen around 20 million tonnes versus the 60 million of 2025.
And this is due to the rollout of new regulation in Europe with the Renewable Energy Directive. We got, just a few days ago, Spain again confirming targets moving from energy content to GHG reduction and banning double counting. And then on top, in the US we got in April confirmation on the new target from the Environmental Protection Agency. And even if we look at the market as a whole, we saw that the flows from US to Europe are pretty much dropping, and this is because the value of both markets is quite relevant and strong, given what I said.
So this is another strong signal moving forward.
Giuseppe Ricci — Industrial Transformation Chief Operating Officer
Okay, about the same. What we are seeing now in July is a very, very high level, about above $30 per barrel. That should remain very bullish in the next months because of the combination of many factors. First of all, the storage is very, very low for all the products. There is a low refining capacity in operation, and we are in the driving season. The crack spreads that we are seeing in gasoil but also in gasoline are very, very high. And there is also some premium to import the product.
So what we expect in the next months is a very, very bullish period, and we are gaining from this because we are anticipating the shutdown of Sannazzaro and Milano refinery that are the two main capacity and conversion refinery that we have. The third refinery, Taranto, has planned the shutdown for maintenance in September, but we are moving this shutdown for a couple of months in order to gain all the period.
John Rigby — Investor Relations
Very good. Thanks, Pino. We're now going to move to Paul Redman of BNP Paribas.
Paul Redman — Analyst at BNP Paribas
Paul. Yeah. Hi everyone, and thank you very much for your time. I had one question on strategy, and that was just around the 320 service stations you've recently acquired in Europe. I just want to understand the strategic rationale for buying fuel stations today, but also what the impact could be on earnings from the deal. And then secondly, you guide to underlying improvement in your cash flow from operations of 700 million euros this year. I wanted to ask what the key drivers of that underlying improvement are.
Thank you.
Francesco Gattei — Chief Transition and Financial Officer
About the acquisition in Central Europe, mainly Germany and Denmark. This is part of a strategy of expanding our Enilive marketing activity. Enilive has already exposure to marketing in the country in Germany that is the second country as a number of stations. We thought this is a good opportunity to buy a second-tier brand that could be improved in use in terms of valorisation thanks to our clearly branding, possibility to add shopping and convenience stores, and benefiting also from local logistics support from our Germany refinery participation.
We have two participations in two plants in Germany. The contribution, this is an asset that has generated in the range of 40–50 million euro for EBITDA. In terms of cash flow from operation improvement, cash flow from operation improvement is related to all the improvement that we mentioned during this conference: production growth, upstream production growth, cash flow per barrel related to that growth, opportunity in growth generated by GGP and Enilive, benefit improvement that we mentioned through scenario and plant availability.
All these elements are contributor, the major contributor of the cash flow revised guidance.
Paul Redman — Analyst at BNP Paribas
Thank you very much.
John Rigby — Investor Relations
Thanks, Paul. We're going to now move to Nash at Barclays. Nash.
Nash — Analyst at Barclays
Thanks, John. Good afternoon all. Two questions, please. The first one is downstream. Both Enilive and Plenitude continue to improve profitability, and outlook has improved too, especially on Enilive. I wonder, does this change your view or your partners' strategic view over those businesses? And my second question is on upstream. You have a very busy upstream growth pipeline — 54 organic growth projects, as you mentioned. Could you talk about what Eni has done right to progress them in time and under budget?
Are you worried about future capex cost inflation, please? Thank you.
Claudio Descalzi — Chief Executive Officer
On the view about Enilive and Plenitude. I think that this business confirmed the model, the way we created this business, that is putting together renewable content and transition content plus retailer and therefore marketing outcome. This reinforces the possibility to navigate through the cycles. You saw in this business different cycles up and down because sometimes there are improvements and there is a slowdown, et cetera. But through the combination of these two elements, we are able to manage in any case this kind of trend.
We have a stronger balance sheet in each of them, so we have the possibility to use the generational cash on one side of the retailer in order to supply the growth of the renewable side. And therefore I think this is a confirmation that what we set up in the last four or five years related to these two businesses, and the partnership that recognizes the value of that, is effective and working. This also helps us to have a faster view towards potential IPO.
That is a final goal for each of them.
Guido Brusco — Chief Operating Officer, Global Natural Resources
On our pipeline of projects, a couple of things. First of all, we proved in the past, as Claudio said, that we've been able to manage projects within cost and within budget. And we've been able also to run multiple projects. Just to remind, last year we've started up five major projects. So we demonstrated that we are able to handle quite a large number of projects because of our fast-track model which is designed for that. It is designed to run parallel activity.
It is designed also to have quite a high degree of on-hand features. We have an engineering company into the corporation which is helpful in this kind of projects. As far as concerned inflation, you are right. I mean the inflation, especially after, the inflation was already in the region of 3 to 4% 2025, 2026 to 2025, and after the Middle East conflicts the range is becoming more 4 to 6% because of the, of course, cost of the fuel and the dislocation of the market.
But to ensure cost discipline and schedule reliability across the projects, on top of this designed fast-track model we have also an integrated procurement strategy which allowed us to expand the supply chain into new frontier markets, strengthen strategic partnerships through master framework agreements, and also apply some refined tendering approach. Consider that most of the contracts for the projects we are talking about are already locked in before the crisis of the Middle East.
Nash — Analyst at Barclays
Thank you very much.
Claudio Descalzi — Chief Executive Officer
Thank you. I want to add something about what Guido said because, you know, we are in this situation today because strategically we built the company in that way. When, 15 years ago, everybody were outsourcing, we insourced. It was against the mainstream, against the trendy situation of 15, 16 years ago. People preferred to reduce risk going through M&A, but we decided to insource. We decided to create an engineering company. We decided to be specialized in the exploration, and then we decided to be specialized in the development, becoming the main contractor and moving the different packages.
So when you talk about cost, to be able to contain cost, you must have the skills to control your activities in each single step. If you are not able to control your activity, you can use the best model you want. You are not able to control your cost. If you build your project, you are able—if you build your company with this purpose—you are able to do that. And not only we demonstrated, but it was our strategy. And when we presented this kind of strategy more than 15, 16 years ago, people were surprised because we were not following the trend in exploration, in everything.
But now I think that we are in the best position to not just find new exploration resources, but be able to develop, be able to control our costs, be able to give the right guidance to our contractors.
Nash — Analyst at Barclays
Thank you. Very helpful. Thanks, Claudio.
John Rigby — Investor Relations
Thanks, Nash. I'm conscious I said we'd close at the top of the hour, but I'm going to take my contingency and go to 3:10. We may not get around to everybody asking questions, so I apologize for that and you can follow up later. We're now going to move to Henry Tarr at Berenberg.
Henry Tarr — Analyst at Berenberg
Hi there, and thanks for taking my questions. I have two. One is you have several projects obviously underway currently in the UAE and in Qatar. Is there any indication of the impact so far of the Hormuz disruption on these projects? I guess, sort of following on from the cost question. And then secondly, the site transformation, I guess costs have been running at sort of 50 million a quarter through the first half. Is that a sensible indication for the second half?
Thank you.
Guido Brusco — Chief Operating Officer, Global Natural Resources
On the first one, the answer is very short. There's no impact on the projects. Most of the activity, the manpower and material were already in country, and so it's progressing. And this is both in Qatar and, of course, in UAE.
Giuseppe Ricci — Industrial Transformation Chief Operating Officer
Yes, about the site transformation. This is already a flat trend, a steady quarterly trend that we expect to decline in the next years because clearly you reduce the amount of activity that has to be transformed.
John Rigby — Investor Relations
Thanks, Henry. I'm going to move now to Al Syme, Citigroup. Al.
Alastair Syme — Analyst at Citi
Thanks, John. Can I just return to the question on Venezuela? I mean, can you give us some clue about what you're looking in terms of the ways of protecting your investment? I mean, clearly there's big potential, but there's also quite a big investment. So is it a service agreement or PSC? What sort of fiscal structure is it? And then I had a second question, actually bizarrely on fusion. I saw this quarter you signed this fusion fuels agreement in the UK.
Obviously you've got CFS starting up in Boston next year. Can you talk about what you think the next couple of years in fusion looks like? Should we be getting very excited about it? Thank you.
Claudio Descalzi — Chief Executive Officer
For Venezuela, I think that we already said before that that is a different kind of contract. So it's more likely a, more likely a PSC or something like that. But, you know, this kind of… I talk about Junín 5 because Junín 5 is the main topic. So Perla, no problem. We can export. Corocoro is good, but it can give a contribution, but it's more… But the big contributor—we talk about really a big contribution, because it's almost 5 or 6 billion gross recoverable resources—is coming from this field.
This field is mainly a drilling, because it is a shallow reservoir, 1,000 ft. So you can imagine what we do or what people do in the Lower 48, Permian—so very fast drilling—and then you recover. So you invest, you recover; you invest, you recover. It's not really a standard upstream project where you have to invest for four or five years or three years, what you want, and then you start recovering. So you have a lot of inactive capital and big exposure.
In this case it's more operating spending. So the structure of the business really gives you a protection because it's a very fast recovery. Clearly you have to invest. Yes, you have to continue investing. The depletion rate is not the same as the Permian; it's much better. I mean the drainage area is quite good, so if it's very heavy that continues to produce also for some time without big depletion. But we also have the contract from one side is not imprisoned—clearly we are not going, we are not going to invest with the oil contract—and from the other side the kind of E&P project that protects you from exposure in your capex.
I don't know, you want to say something? No. Okay, so talking about fusion, Lorenzo, that is our director, head of all the technological services R&D and is in charge of fusion. Maybe he can spend some words.
Lorenzo — Head of Technology Services and R&D
Thank you. Thank you, Claudio. Just to provide you an update for CFS, the activity is going very well. We are at final stage of construction. We are physically assembling the machine. We are more than 75% of advancement. So we are very confident by next year, beginning of 2028, machine will be ready, and then we will start up, decommissioning, to reach the positive Q greater than 1. Concerning the activity in UK, we have signed an agreement with the UKAEA, which is the nuclear agency.
We are building a machine/plant to treat the tritium. We are in the range of the 30% advancement, and recently, like you correctly said, we created a private company called Riova with the aim to commercialize these technologies and so to become also an opportunity for industrial purposes. So activities are going very well in this direction.
John Rigby — Investor Relations
Thanks, Lorenzo. Thanks, Al. We're going to now move, and I think this will have to be the last question, and I apologise to those still waiting. Maybe we can talk to you later. So this will be to Matt Lofting at J.P. Morgan. Matt.
Matt Lofting — Analyst at J.P. Morgan
Thanks, John. Congratulations to you all on a very strong update this morning. I wanted to just ask you about Latin America as a portfolio hub. You talked about Venezuela earlier, but when you look at the continent as a whole, it looks like it's becoming increasingly important to the diversification strategy and growth profile that you've talked about over the last hour or so. Can you just expand there in terms of the extent to which that's becoming more significant to Eni as you look forward to 2030 plus and how you think about best structuring investments in that part of the world in order to optimize investment paybacks.
Thank you.
Guido Brusco — Chief Operating Officer, Global Natural Resources
Yeah, as we already said also in the capital market update back in March, if you look at the production distribution at 2030, South America will play a significant role in our share of production, mainly from, of course, Argentina, Venezuela, but also Mexico. In Mexico we are running at 95,000 barrels of oil equivalent per day and we are the largest international producer. The asset in Venezuela we have described already. Claudio gave some interesting features on Argentina.
We are talking of a world-class basin, 25 Tcf, 500 million of condensate which makes 4.8 billion barrels of oil to be recovered. We have an estimated production at peak at around 550,000 barrels of oil equivalent, of which 200 liquids and the remaining is LNG for export. And this is, I would say, the inventory of the reserves already discovered and to be developed. We are also expanding our exploration portfolio. We have acquired blocks in Uruguay, which is a very, I would say, promising basin.
And soon we will update you also on our plans in Uruguay. As far as the financial structure on Venezuela, Claudio already said, which will be our setup in Argentina. We are in partnership with YPF, the national oil company, and XRG. And this will be an incorporated venture which will manage all the value chain from the upstream to the midstream up to the export. The export is on an equity-like basis from at least the two international shareholders.
Claudio Descalzi — Chief Executive Officer
Thank you, Guido. I want just to add something in perspective. We talk about energy race. So we really, we have to increase production, increase and find energy. And the situation is quite different compared to what happened, you know, 10 years ago, five years ago only, or maybe 10 years ago. We have Russia, we have all the Gulf; now what was certain a few years ago now is no more certain. And you know, we lost some country where we can go there and buy energy.
Russia, okay, they produce, they still produce. But we are not now Qatar or two other in the future we are going to have again. I hope so. But in any case we need more energy. And the race to energy now is different because there is no country where you can go there and buy energy. You have to go there and explore. You have to go there and develop, you have to go there and put in production, and then you can have your energy. So not just diversification, you know, if you say that we need just diversification, you are superficial.
You must have the skill to go there and find your resources and stay on the value chain. So that is very different paradigm. So the world is changing. It's no more a question of buying stuff and selling stuff. We are not in the, you know, in the commercial, just trading. You must be in the industrial situation where you are able to explore, develop and produce. Is something going back to the basics? Maybe, yes. But that is the situation of today.
Diversification is not enough. You must do the work from the beginning to the end if you want to win this energy race. Thank you very much.
John Rigby — Investor Relations
Thank you, Matt, for that question. I'm going to wrap the Q and A up right now. So again, apologies to those who weren't able to ask a question. Do please follow up with the investor relations team. I'm going to say good luck for the rest of the reporting season and please do enjoy a nice holiday period and we look forward to seeing you in September. Bye.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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