Hello and welcome to the Repsol Second Quarter 2023 Results Conference Call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Ramon Alvarez-Pedrosa, Head of Investor Relations. I would now like to hand the call over to Mr. Alvarez-Pedrosa. Sir, you may begin. Ramon Alvarez-Pedrosa: Thank you, operator. Good afternoon and welcome to Repsol's second quarter 2023 results conference call. Today's call will be hosted by Josu Jon Imaz, our Chief Executive Officer with other members of the executive team joining us as well. Before we start, let me draw your attention to our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in the disclaimer. I will now hand over to Josu Jon.

Thank you, Ramon. Good afternoon to everyone, and thank you for joining us today. I'll start with a review of key messages before moving to the business performance and results. At the end, I'll update our outlook to the end of the year, 2023. As usual, after the presentation, we will be available to answer your questions. Starting with the main messages. The second quarter has evidenced the strength of Repsol's transformation, having delivered another set of solid results and cash generation in volatile unless favorable environment. Coming from the changes triggered by the invasion of Ukraine, the energy markets are gradually adjusting to the economic context. Although the evolution of the macro is impacting results, second quarter earnings remain above previous normalized levels. The operational performance was in line with expectation allowing us to continue progressing towards long-term objectives and delivery of our strategic commitments. The adjusted income was EUR827 million, a 56% reduction compared to the first quarter, mostly due to softer gas prices in North America and a contraction of refining margins that nevertheless were still above previous cycles. Cash flow from operations reached EUR1.7 billion, 7% lower than in the previous quarter. The negative impact of a weaker commodity price scenario was largely compensated by a significant unwinding working capital build-up of the first quarter. The accumulated cash flow from operations in the first semester stood at EUR3.5 billion. Net debt gross touched EUR0.8 billion, a 9% reduction compared to March, 65% lower than December 2022. In line with other rating agencies, Fitch recognized our strong financial situation and disciplined capital approach, upgrading Repsol's credit rating by one notch to BBB plus. Repsol has finalized pending litigation on two significant legal disputes affecting the company, in addition to agreement about Maxus's reach in the first quarter, the settlement agreed with Sinopec in April, subject to the satisfaction of conditions ends our long running arbitration process regarding our joint venture in the UK. With regards to shareholder remuneration, we remain committed to distribute around EUR2.4 billion to our shareholders in 2023 through a combination of dividends and capital reductions. Last quarter, we cancelled 50 million shares committed earlier in the year. After quarter end, we paid the second dividend of 2023 for a total of EUR0.70 per share, an 11% increase compared to 2022. In May, our AGM approved of EUR0.375 per share dividend to be paid in January 2024. Moreover, as you may have read this morning, we have announced the cancellation of another 60 million shares before year end for a total of 110 million shares redeemed in 2023. For this purpose, the Board has agreed the implementation of a new 50 million share buyback program starting today with the remaining 10 million coming from treasury shares and shares held through derivatives. Once the second capital reduction is executed, the number of outstanding shares will be standard 1.2 billion shares, lower than the share count when the script (ph) was implemented in 2012. Considering that 200 million shares canceled in 2022, this will make for a total of 310 million shares redeemed since the release of our strategic plan. This figure is, roughly speaking, more or less equivalent to 20% for assured capital as of December 2021 and well over the original target for the five-year horizon of our strategic plan. Finally, having captured the favorable commodity context to accelerate our transformation and with most of the main targets to 2025 already met, we expect to provide you with a strategic update in the first quarter of 2024. Before that, I appreciate to meet many of you in another addition of our ESG day to be held in London on the 3rd of October. Let me now briefly review the evolution of the main macroeconomic indicators in the quarter. Brent crude averaged $70, $80 per barrel, $3 decrease quarter-on-quarter and $36 below the same period a year ago. The Henry Hub averaged $2.1 per million BTU, 38% lower than in the previous quarter and 71% lower than a year ago, affected by lower demand due to mild temperatures and higher production levels. Repsol's refining margin indicator averaged $6.4, around $9 lower than the first quarter and the $17 lower than a year ago, impacted by lower-middle distillates spreads and also the narrowing of heavy crude differentials. Lastly, the euro continued to strengthen against the dollar, operating 1.09 dollar per euro during the quarter. Moving now to our business verticals. The Upstream division maintained a positive momentum thanks to the contribution of new projects and the streamlining of its operations, increasing the returns and resilience of the business. Let me remind you that we maintain a strict profitability requirements for the new investments, aligned with the conservative $50 Brent and $2.5 Henry Hub price deck of our strategic plan, protecting our projects against potential loss scenarios. The adjusted income was EUR0.4 billion, 57% lower than in the same period of last year, 2022 and 14% lower than in the previous quarter. Year-over-year, the contribution of higher production was more than offset by weaker oil and gas realizations and higher costs. Production volumes averaged 596,000 net barrels of oil equivalent per day, 10% above the same period in 2022. The accumulated production to June averaged 602,000 barrels equivalent. They are in line with full year guidance. Year-over-year quarterly volumes benefit from the start-up of new wells in unconventionals, the contribution of new assets in the Eagle Ford, and a higher production in Libya, and a higher gas demand in Venezuela, which compensated the asset disposals of 2022 on the logical natural decline. The development activity remained focused on efficiency, the efficient, better said delivery of our key projects starting in Brazil Repsol and our partners approved the development of Campos-33 in Brazil which comprised the Pao de Acucar, Seat and Gavea discoveries. The project is expected to start production in 2029 -- '28, sorry, contributing around 25,000 net barrels a day of gas, oil and condensates. Repsol currently produces around 40,000 net barrels a day in this country. In the Gulf of Mexico, we have consolidated our position by increasing our stake in the Blacktip project to 50%, with an estimated 200 million barrels of recoverable oil resources. The FID is expected in the next two, three years, contributing to the objective of maintaining a stable production of 30,000 barrels a day, 40,000 barrels a day in the Gulf. Our exposition to unconventionals, the Gulf of Mexico and Alaska confirms the United States as one of our key growth areas within our Upstream portfolio. In unconventionals, we continue to closely monitor the gas prices situation with the flexibility to adjust operations subject to market conditions. We are currently running one rig in the Eagle Ford and one only one in the Marcellus. In the UK, our agreement with Sinopec influenced the acquisition by Repsol of 49% stake in the JV, becoming a 100% owners of North Sea business unit. Under the agreed terms both companies will immediately suspend and at compression shuttle the long-running arbitration proceedings in relation to Sinopec's acquisition of its stake from Talisman. On 100% basis, we expect our UK production to reach 40,000 barrels a day, having full control of the operations with a Repsol to identify additional synergies, optimize the ambitious commissioning roadmap and generate more opportunities to develop contingent resources. The transaction we have estimated $1.1 billion net cash flow impact for Repsol, considering the cash available in the JV that will now be fully consolidated in our accounts. Settlement of the arbitration is expected to occur before the end of the year and cash out in 2024. Repsol and Sinopec will continue our broader strategic collaboration, including our joint venture in Brazil as shown by recent approval Campos-33. The Industrial division continues to maximize value in the current scenario, while progressing in the decarbonization of our sites. The adjusted income stood at EUR344 million, 73% lower than the previous quarter and 71% lower than the same period a year ago. Year-over-year results were negatively impacted by lower refining margins. The ongoing weakness of chemicals and a lower contribution of trading partially compensated by higher results in Wholesale & Gas trading. Refining margins have gradually decreased from the levels of a year ago, largely as the uncertainty around diesel supply has diminished. Nevertheless, second quarter margins remained healthy. Diesel spreads averaged around $19 per barrel, which compares to the almost $50 of a year ago and $33 in the first quarter of the year. So far in July, The average spread of diesel has been around $25 and $28 for gasoline, improving in a significant way, the refining margin along this July. The margin indicator averaged $6.4 per barrel, which compares to $15.6 achieved in the first quarter and $23 a year ago, mostly due to the narrowing of middle distillates spreads. The indicator averaged $11 in the first six months of the year 2023. Margins reached their year lows by the end of April, due to, first of all, elevated levels of diesel inventories and also the return at that time to operation of French refineries. In May, they began a gradual recovery supported on distressing of gasoline and lower energy costs. The premium generated in the actual margin was $0.2 over the indicator, negatively impacted by, I mean you that we were in the midst of a turnaround season. So the turnaround of Cartagena, the unplanned maintenance in A Coruna and less favorable environment. The average utilization of the distillation capacity was 80% and the utilization rate of the conversion units reached 90%. During the quarter we completed all the remaining planned maintenance for 2023, should allow us to maximize plant availability for the rest of the year. So, we expect normal full operation from now on to the end of the year. Our refineries continue to process Venezuelan crude, accounting to around 4% of the total crude input, and during the second quarter, we received three new cargos, for a total of 3 million barrels of oil. In Chemicals, the margin indicator was 31% lower year-over-year and 44% above the first quarter of 2023. The demand situation remained weak. As expected, seasonal uptick in some sectors didn't materialize. Looking forward, market seems cautious about a significant demand recovery before the end of the year. And this situation may prompt the industry to focus on inventory management, limiting plant operating rates. With regard to the transformation of our industrial sites, the European Union through its innovation funds granted Repsol a EUR62 million for a 150 megawatt green hydrogen electrolyzer in Tarragona, with startup expected in 2026. In SAF, in Sustainable Aviation Fuels aligned with our ambition to play an important role in the decarbonization of the aviation sector, we have reached an agreement with Ryanair to supply 155,000 tons of sustainable aviation fuels between 2025 and 2030. Additional alliances have been closed also with Gestair and Vueling. Finally, yesterday we took the FID for the retrofitting of one of our units in Puertollano, which will allow us to increase our renewable diesel production by 200,000 tons per annum by the end of 2025. Repsol currently has a production capacity of 700,000 tons per annum of low carbon fuels. The upcoming C43 projects in Cartagena and this retrofitting of Puertollano will produce 100% renewable net zero emission fuels, and what is important, these two projects are going to improve in a significant way, the premium of our refining margin. Our service stations are already been adapted to offer these fully segregated products, providing an alternative no emissions mobility option for internal combustion engines. In the customer vertical, the evolution of our traditional business continue. In 2023, we expect to achieve a record of EBITDA, demonstrating the stability and resilience of this division. The adjusted income was EUR148 million in the quarter, 160% over the same period a year ago, with all businesses contributing to the improvement. In Mobility, the higher margins as a result of lower discounts were partially compensated by lower sales in the Spanish service stations and direct sales. In April, we launched our new connected energy program for clients in Spain built around Waylet. This program linked discounts to a multi-energy product portfolio. The Waylet Mobility app reached 6.4 million clients in June, progressing towards the objective of having 8 million digital clients in 2025. In Retail Electricity & Gas, year-over-year second quarter results benefit from cheaper energy sourcing costs. In July, we completed the acquisition of a 50% stake in CHC Energia, having more than 300,000 new customers, delivering our strategic objective to 2025 of having already 2 million customers of electricity and gas in Spain. Moving now to low carbon generation. The power generated by Repsol reached 1.9 terawatt hour, 6% lower than in the previous quarter. The adjusted, you have to take into account that we had a turnaround of one of our CCGT in [indiscernible]. The adjusted income was EUR12 million, 65% lower than in the previous quarter and 76% lower than a year ago. Year-over-year the higher production in wind and solar couldn't compensate for the lower pool price and lower CCGTs production. As I mentioned, one of our CCGTs was in the maintenance season over the period. The development of our renewable pipeline in Chile, continued with the startup of the Elena project, our first solar farm there. Together with Atacama and [indiscernible] wind farms, our installed capacity reaches more than 200 megawatts in the country. Globally, Repsol currently has 2 gigawatts of renewable capacity in operation and 1.2 gigawatts under construction. We remain confident on reaching or even surpass 2.7 gigawatts of installed capacity by the end of 2023. And one of the main contributors to this growth will be Frye solar project in Texas, which is expected to start operations during this quarter to finalize that as this week, the European Investment Bank has strengthened Repsol of EUR575 million loan to support the deployment of our renewable generation projects in Spain, supporting our renewable roadmap to 2025 and 2030. Moving now briefly through the financial results. In this slide, you may have a summary of the figures that we have discussed when we were reviewing the performance of our business. For further details, I encourage you to refer to the complete, the comments that were released this morning. Let me now review our update outlook to the end of the year. Looking forward, we expect uncertainty and volatility to continue, emphasizing the importance of our strong financial position. In Refining, the margin recovery has consolidated in July and our estimated full year average indicator remained unchanged at $9, supported on sustained middle distillate spreads, strong gasoline cracks and lower energy costs. In annual terms, we expect to generate a healthy average premium of around $2 per barrel, the annual average, I mean, driven by higher availability of heavy crude oils and the contribution of biofuels. In Upstream, the good operational performance of previous quarters has continued in July. Year-to-date production has an average around 600,000 barrels per day, aligned with our expectation to produce an average of 590,000 barrels to 610,000 barrels in annual terms, probably in the high range of this production. The expected cash flow from operations in 2023 now sits at EUR7 billion, compared to EUR8 billion before. The reduction is mainly driven by the negative evolution of gas prices more or less, EUR300 million less than expected for the whole year. The settlement of Maxus litigation, another EUR300 million, comparing with our previous guidance. Lower results in Chemicals, [indiscernible], euro-dollar exchange rate. This revision impacted shareholder distributions of the year, our sound financial position with our gearing ratio of below 3% provides flexibility to maintain our commitment to distribute EUR2.4 billion in 2023, above 30% of the cash flow from operations. The dividend of EUR0.70 per share paid in January and July, together with the 50 million shares redeemed in June and the additional 60 million shares that we expect to cancel before year end, comprised our total remuneration for the year. The organic investment remains at EUR5 billion with around 35% going to low carbon initiatives. To conclude our performance in the second quarter highlights Repsol's progress towards becoming a more sustainable and profitable company, able to deliver improved results and cash generation also in less supportive macro scenarios. We aim to be a balanced company, a company that invests in the legacy assets, that support cash flow generation and also, a company which invests in the transformation that will support its future. And I think we are doing all that in a sensible way, building our multi-energy offering, investing our industrial capacity and developing our low carbon platforms, all while guaranteeing Upstream production levels for coming years. Last quarter, all four business verticals continued to deliver according to the expectations managing what we can control to capture the most value of this volatile scenario. The refining environment is gradually coming back from the unprecedented situation of last year. Still, we see refining margins at healthy levels as exemplified by the diesel spreads that we still have today, and this refining margin that we have experienced over the last 10, 15 years, sorry, days that could be something in between EUR9 a barrel and EUR12 a barrel. Our solid financial frame built in previous quarters, allow us to face uncertainty, providing flexibility to deliver on our capital allocation priorities and cope with changes in the commodity cycle. Capital discipline remains at the heart, at the center of our decision making, keeping a strict profitability requirements for new projects, making them resilient and profitable in any future scenario. Despite a lower commodity price context, mainly associated with gas prices, our shareholder distribution commitment, through a combination of buybacks and dividends remains unchanged. Finally, having delivered most of our strategic objectives to 2025, we will provide you, our analysts and investors with an update of our strategy and projections in the first quarter of 2024. With this, Ramon, I hand now the call over to you. Thank you. Ramon Alvarez-Pedrosa: Thank you very much, Josu Jon. Before we move into the Q&A session, I would like the operator to remind us of the process to ask a question. Please operator, go ahead.

Thank you. [Operator Instructions] Ramon Alvarez-Pedrosa: Thank you, operator. Let's move on now to the Q&A session. Our first question comes from Oswald Clint at Bernstein.

Hi. Good afternoon. Thank you for the time. The first question I wanted to ask about Venezuela. I think you mentioned in the results, higher gas demand in the quarter helping your production. But I also see the Venezuelan Oil Minister talking about potentially striking some new gas development deals maybe as soon as year-end to bring on more gas in the country. Is this a live discussion? Is this something you're working on and could that start to become part of the plan for CapEx and volume growth within the years ahead, is the first question, please? Secondly, you mentioned the upgrade from Fitch, the BBB plus, I think it's been probably 20 years since you've had that type of rating with them and the balance sheet is pretty strong. So, I did want to ask around M&A and your appetite for deals. There has been a little bit of linkage with Repsol with some larger deals let's say in the last couple of months, but I know the strategic updates coming in early 2024, but it doesn't feel like you have any large gaps in the portfolio, unless there some strategic change coming. So, perhaps you could just talk around M&A appetite here, please? Thank you.

Thank you, Oswald. I mean, first of all, let me say that in Venezuela, we are fully focused in optimizing our current gas production operation. In Cardon, we are fully focused on that. We are being paid by these oil cargos. I mean 3 million barrels were transported to Spain in the second quarter, sorry, and we expect to have an additional 1 million of our cargo this July. And that is now our full priority in Venezuela, optimizing our gas production in Cardon, of course, always aware of trying to reduce the bottlenecks we could have at our production. I mean there is room for little increase of this production debottlenecking the current plant and we are going to be fully focused on that. Of course, we are following a very accurate way, what is happening in the country, any opportunity that we could see regarding the future, but let me say, that financial currency is one of our main pillars regarding our exploration and production activities all around the world, but also in Venezuela. Going to your second question that was related about, I mean you know that I like the financial currency of the company. I know that I'm going to upset my communication team also today, but I'm fully focused on trying to be the most boring CEO in the world. But let me say that, when I say boring, I am trying to define boring as being present and being predictable. So, we are of course open to evaluate any possibility that may support our transformation journey, but I mean we are trying to accelerate some businesses. We have announced the acquisition of Asterion, development platform with 7 gigawatt some months ago, INPEX in Eagle Ford. We have very good examples of these small acquisitions like Asterion, [indiscernible], but let me say that if someone is expecting a big acquisition from Repsol, that is not going to happen. I mean the only surprise, I'm going to give you is going to be our focus and a positive alignment in the transformation of the company, but also in the distribution of proceeds and dividends to our shareholders and preserving the balance sheet and the financial strength of the company. So, always trying to analyze opportunities to transform the company, but I mean, you can't expect big acquisitions and things like that in the current economic arena in Repsol. Thank you, Oswald.

Thank you very much. Ramon Alvarez-Pedrosa: Thank you, Oswald. Our next question comes from Lydia Rainforth at Barclays.

Hello. Two questions if I could. The first is, I'm just listening to the strategy presentation. Josu Jon, I'm very happy to be back asking questions, but does having sold minority stakes in the Upstream and on the renewable side limit what you can do strategically within that and partly linked to that in terms of the net debt numbers is that why you want to keep the net debt levels where it is at this point? And then the second one was just much more long-term around the green hydrogen. Clearly, we've got some from Repsol, but also a number of Iberian competitors. Do you actually see the construction capacity be met and being able to deliver on the margins? Thank you.

Yeah. Thank you, Lydia and welcome back. I mean, going to your first question about the two partners we have either in the Upstream business in this case, EIG, and our partners in the renewable business, as I recall and EIP, I mean, I want to underline the fact that in both acquisitions, the partners, both supported and were fully aligned with the strategic plan we had previously approved for both businesses. So, I mean, we have great partners in this business, fully aligned with the strategy we previously defined and we don't have any risk, let me say, of misalignment with our partners in a strategic terms, neither, in the Upstream, nor in the renewable business. So, we are going to follow the roadmap that we presented to you in 2020 in both businesses. Saying more, I mean, in the case of renewable business, there is a roadmap to the 2030 year, that has also the support of our of our partners in this roadmap and in this ambition of building 20 gigawatts in operation by 2030. Green hydrogen, I mean, first of all, I mean we are going to start with kind of small production in coming weeks, 2.5 megawatt in Petronor. I mean it's not much in production terms and probably in coming months, we are going to take the two first large electrolyzers in our system, probably Petronor and Cartagena, we are analyzing these opportunities. I mean if the economics are there, we will take in this case FID. But I am going to be very clear. I mean we'll take these FIDs if we see that a double-digit return is there, and that could be possible because you know that this hydrogen, green hydrogen produce and introducing the products of our refinery, is not competing with the green hydrogen that is or was previously produced. It is going to be part of the molecule that is going to be included in the fuel. So, it is always going to be, let me say, an advanced biofuels that is going to have the regulatory support of the current European directive. So, I mean I think the numbers are going to be there. We are going to do our best to have these digit returns and in case of seeing and having these returns, we will take FID. And in this case, let me say, that they are going to contribute to improve our refining margins also in a significant way. Thank you, Lydia.

Great. Thank you. Ramon Alvarez-Pedrosa: Thank you, Lydia. Our next question comes from Biraj Borkhataria at RBC.

Yes, Biraj.

Hi, there. Sorry. Can you --- hope you can hear. Few questions, please. Firstly on the production guidance guiding to the top end of the annual guidance. Could you just walk me through the moving parts, first half to second half and what's driving your confidence to get to the top end? And then a couple of questions on the downstream. On your refining margin premium, obviously, the premium shrunk significantly, Q1, Q2. Is this just a light-heavy spread coming in or could you just walk me through what gives you confidence on that $2 premium for the year? And then finally on sustainable aviation fuel. So, the deals that you've signed so far, can you give any color or comments on the sales margin relative to kerosene or renewable diesel? Thank you.

So, thank you, Biraj. I mean going to your first question, I mean the production guidance, roughly speaking, in the second quarter or second half is going to be exactly the same that in the first half. I mean it's going to be quite stable. We are going to see some increase in the unconventionals, coming from the campaigns we have developed, mainly in Eagle Ford and a bit in the Marcellus and also, we are going to see an increase in the Gulf of Mexico coming from the start of operations in Shenzi, North. So, I mean some added barrels that in some way are increasing our confidence of delivering in the right way the guidance we are giving you for the second half of the year. I mean, going to the refining margin. First of all, let me say that, I mean I talked about $9. It is a good forecast or guidance. I mean I think that the probability of being slightly above that value in the whole year is greater today down the likelihood of being below $9, mainly seeing what is happening in the market over the last weeks. As I said before, we have --- we are seeing day after day and over the last two weeks, the refining margin for Repsol evolve $9 a barrel and some days, close to $11 or even $12 above or so. I'm, let me say, quite confident about delivering, fulfilling the forecast we have seen in the market for the refining margin. Going to the expected average premium, I'm also very confident about the $2 above. I mean, you have seen that the premium this quarter was as we expected before, is quite low, $0.2 a barrel, but we have to take into account that in this period, we had the turnaround of the hydrotreatment, hydrocracker area of Cartagena, you know it is the main refinery. We also have in the first half, the treatment turnaround of Coruna, another four refineries, the shutdown of the one of the two distillation units in Coruna. I mean the maintenance season in Repsol is over for the whole year. That means that we are going to capture all that. On top of that, we are, I mean day after day working and all that is, I mean making room to improvements in efficiency and digitalization plants of our refineries. We are and we see room to have a favorable incorporation of heavy crude oil in a significant percentage to our system. Many of the cargoes we received in the last two months that we are going to process, plus what we are going to receive in July and so on. So, I'm quite confident about that. And let me also add that the importance of the contribution of buyers of biofuel production in this premium, and that's, let me say, is going to be the beginning of a new story in Repsol's refining, because I mean, again of the year, we are going to start operating the what we call the C43, is that on purpose, advanced biofuels plant in Cartagena and this plant is going to add EUR175 million of EBITDA to the company next year in 2024 and is going to add $0.7 a barrel to the premium of the refining margin. So, that means that for next year we are going to have a new $0.7 premium adding to this premium we have year after year. On top of that, yesterday, we took the FID decision of the retrofit in unit of Puertollano, what we call the U614 (ph) per unit. This retrofitting that is converting hydro-desulphuration unit to our new advanced biofuels unit, some others call biorefinery to do that. I mean in our case, the difference is that we are not shutting down any refinery. I mean we are going to operate the former refinery, plus the new units, the new biorefinery and investing over EUR120 million. From 2025 on, we are going to add new EUR80 billion of EBITDA to our system. So a new [indiscernible] of $0.32 a barrel of premium. That means that, I mean, in coming years we are going to be able to increase in a significant way this refining margin premium, thanks to this bio-advanced projects that are going to add new annualized, let me say, to our refining system and transform to be very competitive, but also more sustainable. So going to your question, I mean fully confident about the $2 a barrel. And in the case, I mean, your last question in some way is answered. When I say that what we are seeing in regulatory terms, there is plenty of room to see an increased market of staffing coming in coming years. So, for instance Cartagena is going to be prepared to have a main part of its production, its C43, I mean, to do sustainable aviation fuel. In the case of Puertollano retrofitting, that is going to be possible, but is going to be more focused on HBOs. So, and we are seeing significantly in production terms, clear higher margins in these kind of products that what we have today with the mineral conventional products. Thank you, Biraj.

Just one quick follow-up. In the past you've talked about kind of crude cycle. I think $0.7 per barrel premium. So, am I right in putting all your comments together, you are talking about structurally, an extra dollar on top of that crude (ph) cycle, is that fair?

I mean, when I'm talking about the $2 premium, I'm talking about this year 2023. That, as I said, there are not only the addition of biofuels, there are also the structurally, what the percentage of heavy crude oil and so on market conditions. So, I don't want to replicate. I prefer not to replicate this $2 premium for next years because I don't know what markets conditions are going to be. What I say is that, if we expect next year and ex-premium, I mean we have to add the $0.7 per barrel to this premium coming from the contribution that the C43 plant in Cartagena. So, be more clear, Biraj. Cartagena, if from this quarter, last quarter own is going to add, in annual terms EUR175 million of new EBITDA to our refining system. Thank you.

Great. Crystal clear. Ramon Alvarez-Pedrosa: Thank you, Biraj. Our next question comes from Irene Himona at Societe Generale.

Can you hear me?

Hi, Irene. I am here.

Yes. Hello. Thank you very much. Congratulations on these strong results. My first question is, you refer in the press release to an agreement you signed in the second quarter with Halliburton to automate and standardize your well designs and increase efficiencies. I just wanted to ask, in terms of your new 25% E&P partner now sitting on the Board, is this the sort of value-added that perhaps they bring to the table? And more generally, what benefits is your E&P seeing so far from that cooperation? And then my second question. In Mobility, you had 5% lower product sales in Spain. I presume that was the combined effect of probably the end of the discounts and weaker Spanish GDP. But I just wanted to ask, how you see the outlook for Spanish demand and your product sales in the second half of the year, please. Thank you.

Thank you. I mean going to your first question, first of all, let me say that we are really happy of having a partner as EIG in our E&P. They're sharing with us, let me say some kind of complementary business issue. I mean they have a broad view about the sector worldwide, their financial market also the, I mean they are giving us a lot of clues about M&A market in the in E&P and so on. And I mean, I'm sure that more than a cheque we received some months ago, we are starting to see real value in the contribution on that EIG, and in the Board, we have in the JV they have, I mean, first class people to this business. So from this point of view, I'm really happy with the partner and the contribution. In this specific case, you were asking about the Halliburton. I mean we were working before and in this case, this agreement is not related, let me say to the contribution of EIG. I mean it was working, our people was working in this agreement that demonstrated some way. Therefore, we tried to do to protect activity and cash generation in the procurement process, but this case is not related to do the EIG contribution. Going to your second question, I mean, my first point is that, I mean we have to take into account that last year we had an extraordinary sales campaign in the second quarter that was fully related to the intensive discount campaign we developed over the last second quarter, last year. I mean, if we compare the market evolution, I mean, our sales in volumes have clearly evolved what we had the year before, but it's true that we are reducing in a 6% our sales, 5%, sorry, in this year, in the second quarter, because we have more focus on having a strong cash generation and in some way, we changed the framework of the discounts we had last year. Now we have a different kind of discount, more related to a multi-energy offer. We maintain discounts with Waylet, the app, from EUR0.05 to EUR0.20 a liter, but that depends on the level of commitments from clients, car, electricity, heating, or solar generation at home. So, all in all, what we are seeing is that we are taking this lever of the position we have in the service station also to grow as we are growing in a significant way in the electricity and gas retail market in Spain. So, and what is important, I mean, the forecast of EBITDA we have in the whole commercial business, supply and businesses of Repsol for the year 2023 is going to be above EUR1.1 billion. That is a historical figure. I mean five, six years ago, we had an EBITDA at around EUR750 million in the whole Customer business for Repsol. And that is more or less the proof that we are entering new businesses, adding new clients and all that is giving us a positive growth of EBITDA. In the Spanish market terms we are more or less at the same level of consumption we had in 2022 in the whole market. Thank you. Irene.

Thank you. Ramon Alvarez-Pedrosa: Thank you, Irene. Our next question comes from Pedro Alves at CaixaBank BPI.

Hi. Good morning. Can you hear me?

Yes.

Hi. Thank you for taking my question. Just two if I may. And it's related to your guidance of CFFO and the downgrades to EUR7 billion. So, it is EUR0.6 billion roughly explained by them, natural gas prices and massive litigation and rest from chemicals and NFX. So, I was wondering if you can provide us a little bit more color on your assumptions for Chemicals of the EBITDA for this year and compared to what you were expecting previously? And also in terms of working capital, what is embedded in your cash flow guidance because you had quite a good release in the second quarter. So, if you can provide also, your expectations for the evolution of working capital for the rest of the year. Thank you.

Thank you, Pedro. I mean, as I mentioned, when we talk about the cash flow from operations, guidance change from EUR8billion to EUR7 billion, more or less this reduction comes from a EUR300 million from what is the gas prices change, EUR300 million comes from the Maxus settlement, EUR300 million from related to the euro-dollar rate and the rest is, I mean, main of could be related to the Chemical business. I mean, let me say that we are seeing a weak demand in the European market and in the global market for chemical products. Just curious, because I mean we are seeing a very different environment in economic terms in our Mobility products, where we have seen a market that is very positive in terms of growth, in terms of all of sales and growth. What we are seeing and in what is the Chemical products market and the demand for commodity petrochemicals in Western Europe remain weak. Low demand is affecting nearly all chemical sectors. I mean, automotive, electronic, comfort, household goods, industrial and probably, this low demand is related to the inflation and the cost of living. I mean we have seen a general drop in consumption, but that is curious, everything I am saying about the Chemical business is not happening in the Mobility business, where we are seeing a different scenario. I mean demand is there. Shares are pretty good. Also in Aviation, in fuel for trucks, and I mean, probably that is curious, but perhaps is related to some kind of postponed dynamic behavior. I mean, when we were during the pandemic, we trended to buy a house appliances, physical objects iPhone, I don't know what. Now, the same purchase capacity that probably is lower, because families are suffering the inflation, are suffering the interest rates and so on, is applied in traveling, in going out, in visiting friends, in visiting relatives. I mean and all that is very positive in economic terms for the Mobility sector and it's also positive for, let me say, also our economy in comparative and relative terms like Spanish economy that is more focused on services done on the industrial sector. So all in all, we are taking advantage of these ways in our Mobility businesses. And going to your question about the Chemical business, the best guidance I could give you today is that the EBITDA of the year could be close to zero this year. So, that will be the best guidance for the Chemical business of Repsol because clearly speaking, we are not seeing any improvement now in the Chemical products in this is starting phase of the second half of the year. Going to your working capital question, is embedded in our guidance, and taking into account the increase we have in inventories and working capital terms in the first quarter of the year that has been partially released this second quarter, as you could see in our balance sheet, what we expect in the second half is to release an additional amount of EUR600 million, more or less, roughly speaking, in working capital terms. And this EUR600 million figures for the second half of the year is already embedded in these 3.5 (ph) more or less EUR1 billion cash flow from operations guidance forecast, I gave before for the rest of the year. So, in this figure of EUR7 billion of cash flow from operation is embedded. The figure of EUR600 million release of working capital for the second half, we expect, I mean, when I say we expect, in case of having flat commodity prices from now on to the rest of the year of course. Thank you. Ramon Alvarez-Pedrosa: Thank you. Pedro. Next question comes from Kim Fustier of HSBC.

Kim, are you there?

Yeah. Hi. Sorry. Hopefully you can hear me now. Good afternoon, and thank you for taking my questions. My first one was about reports of a potential big farm down of some of your wind and solar assets in Spain worth something like EUR700 million to EUR800 million. I mean that would be a material cash inflow and your balance sheet is already very unlevered. So, just wondering how you would look to recycle the capital? And then secondly, in the Marcellus. I think you've dropped to one of your two rigs. Was that always planned or was that because of low gas prices, and then at what Henry Hub gas price would you potentially consider putting a rig backhaul? Thank you.

So thank you, Kim. I mean, first of all, let me say that, I mean, this asset rotation in the renewable business is part of our business model. You know that we are fully committed in having a double-digit returns in this business and we are delivering on that. To deliver on that, what we say is we take in every stage of pipeline, we develop the project, we invest managing the engineering, the operations and maintenance, and when the asset is operating and having a secure PPA for a significant part of this production, what we say is to divest 49% to an investor, normally is a financial investor, that is by acquiring the risk renewable assets. So, paying a higher multiple for this assets. So, what, I mean, in the last processes we have captured returns, I talked about double-digit, but returns of 15%, 20% more or less after this asset rotation operation that again is part of our business. So, now we are launching a new process, a process where 600 megawatt, more or less roughly speaking of the Spanish assets are there and what we are looking for is exactly the same. We are trying to rotate these, the risk assets, to increase the return we are capturing in this business. So, what we are doing with the capital is again going on investments in this business, that as I said, is showing the capacity to get clear and pretty returns for the company. I mean, in the case of the Henry Hub, I mean, let me say, revenue is picking. For instance, in the Marcellus, in the three rigs we had, we could have a break even in terms of net present value. I mean with at 10% value creation, that in all cases, we're below $2.7 million BTU, $2.8 million BTU. In the case of the first thing, I think that was closer to $2.1 million BTU and $2.2 million BTU and the most expensive, probably depending on the contracted time closer to $2.7 million BTU to $2.8 million BTU. And the second one was more or less in the middle of this range. So, what we are seeing for coming months and what I think is not relevant, the most important thing is to see what the market and the futures market is showing for coming years could be, I mean, for instance, the American EIA is forecasting something between $3 million BTU and $4 million BTUs for next year, 2024. So theoretically you can see, I mean why are not introducing a new rig. Let me say, first of all, we have a capital application policy related to the E&P. Secondly, I mean our experience is telling us that we have to take the whole cycle and we have to try to have stable production that is crucial to guarantee that the cash and the returns are going to be there. So, even seen that today we will be able to put a new rig and theoretically, we have the prices sustaining the returns for this rig, we prefer to be province in terms of capital allocation policy and reducing a bit in this arena, the capital commitments we are taking in the American unconventionals. Thank you, Kim. Ramon Alvarez-Pedrosa: Thank you, Kim. Our next question comes from Alessandro Pozzi of Mediobanca.

Yeah.

Alessandro?

Yeah.

Thank you.

Yeah. Just wanted to go back to the refining side and you mentioned the Spanish indicator to be around maybe time $11 the last couple of weeks. I was expecting actually a bit more given the strength in gasoline and diesel crack spreads, and I was wondering how much of a headwind, the tight light-heavy light spreads are at the moment for Europe for the refining, let's say for the refining operations? And the second question on refining is, you mentioned a premium of $0.7 from the new investments in biofuels. How exactly do you get to that number and what are the assumptions behind it. And final question, Upstream really strong in the quarter. Also thanks to a lower tax rate. I was wondering whether this is more of a one-off or should we assume a lower tax expense in the coming quarters as well?

Thank you, Alessandro. I mean what we are seeing these days, the figure I have in mind, sorry, I can check it, that is at around $10, $10.5 or $11 a barrel of discount of the heavy oil combined with Brent. So, and we are having, with these discounts, we are having these days, these $10 a barrel, $11 a barrel, $12 a barrel of refining margin in our Refining business. So, that is what we have today in the market and what is true and is supporting in some way the additional premium we are having this year is also the capacity we are having or processing a larger amount of heavy oil, comparing with what we expected before. So, I mean, we are being able to sustain a significant part of heavy feedstock to our refineries. Going to your, I mean this $0.7 a barrel, the improvement in premium coming from the C43 on purpose plants of Cartagena, the assumptions that we have behind that is EUR175 million of EBITDA that more or less fits with an expectation of having a margin equivalent to margin of HBO Yuko at around $1,000 a tonne. So, that could be more or less the province assumption we are taking. I mean if you compare this figure of EUR175 million with a EUR260 million barrels, or EUR265 million barrels, or EUR270 million barrels we are processing year after year, the $0.7 per barrel comes from this figure. Going to your question about the lower tax rate and so on. First of all, this is an adjustment in the Upstream tax situation coming because at the end of the year, in some countries, there is an adjustment or some kind of regularization regarding the tax we paid last year. So, and in this case, the Upstream is related to Northern --- some northern African countries, Indonesia and some others. So, it's one off, of course, because it's related to the differences, but being one-off doesn't mean that, that is not going to happen in coming years. I mean that could happen because we try, of course to optimize our operation and optimize everything, that being accurate is one-off. Going back to the third and fourth quarter, I mean, you are going to see, let me say, rates that could be close to 40% on the high 30s. So, they are going to be, let me say, more normal. But again, it's one shot, but we try to have a lot of one-shots in the roads to try to improve our cash and try to improve our P&L. Glad to meet, Alessandro.

Thank you. Ramon Alvarez-Pedrosa: Thank you, Alessandro. Our next question comes from Ignacio Domenech at JB Capital.

Hello. Can you hear me? Ramon Alvarez-Pedrosa: Yes. We are here.

Okay. Hi. Good afternoon. Just two questions from my side. The first one is on, coming back to the Mobility business. We've seen volumes coming down this quarter, but I believe the contribution is slightly stronger now. So, I was wondering what are the dynamics here. If you are seeing a higher contribution from non-oil EBITDA and maybe if you could give us a sense of how this contribution would be growing throughout the year and maybe into the next years? My second question is on the total distributions of 2.4 billion that you seem to be very committed. I believe, in one of the release this morning, as you were mentioned maximum net investment of EUR850 million on the new buyback program you're launching. So, I was wondering if the net investment below this figure? If there is flexibility to increase the program probably in Q4 later in the year? Thank you.

Yes, Ignacio. Thank you very much. I mean going to your first question, I think that the normal contribution margin is the current one. What happened last year in 2022 is that we applied our policy in our service stations, focused on having a strong discounts for our clients due to the situation that market and society was experiencing last year. Remember that we applied almost EUR450 million or EUR500 million of discounts in our service stations last year, reducing in some months to zero, our margins in order to be close to our clients. I mean what we are seeing now is a normal development of our business that is going to follow in coming months. So, in terms of EBITDA, EUR1.1 billion is today the guidance we have for the client business. We have to take into account that we talk about client, we are not talking only about Mobility business. I mean we have some other businesses that are growing in a significant way. For instance, the gas and power business, what we call the power retail business, lubricants, asphalts, specialties, LPG and so on. So, all in all, EUR1.1 billion that is going to be historical for our company for this client businesses of our company. I mean, going through for this EUR2.4 billion, our commitment is to distribute this amount that is higher, that 30% of new expected cash flow from operations. So, roughly speaking, we talk about EUR2.4 billion and this figure is in some way fitting with what is EUR110 million of shares acquired over whole year. 110 million shares, 50 million we redeemed in June, plus the 60 million we are going to redeem at the end of this year, 50 million of them coming from the purchase program, we are launching today. So all in all, this EUR100 million shares, plus this EUR0.70 dividend of the year, I mean we have the figure of EUR2.4 billion euros of distribution. That could be at the end of the year, I don't know EUR2.35 billion, EUR2.38 billion or EUR2.43 billion, but it's going to be there. I mean, in case that is a central scenario. I mean, of course, I don't think that is, let me say the most likely scenario that in case of seeing, I don't know, some kind of disruption in the price of commodities in coming months and having a cash flow from operations of EUR9 billion at the end of the year, of course, in that case, our commitment will be to distribute 30% of the expected cash flow from operations. But I think that today, taking into account that we are distributing 33%,34% with what we expect as cash flow from operation at the end of the year, $7 billion. I think that is going to be probably the figure. The total figure of distribution for this year. Thank you very much, Ignacio. [Foreign Language] Ramon Alvarez-Pedrosa: Thank you, Ignacio. That was our last question. At this point, I will bring our second quarter conference call to an end. Have a very nice summer. We hope to see some of you on our ESG Day on 3rd of October and thank you very much for your attendance.

That does conclude our conference for today. Thank you for participating. You may now disconnect.