OMV AG

Thank you, Charlotte. Good afternoon, ladies and gentlemen, and welcome to OMV’s earnings call for the first quarter 2019.

With me on the call are Rainer Seele, OMV's Chairman and CEO; and Reinhard Florey. Rainer Seele will walk you through the highlights of the quarter and will discuss OMV’s financial performance.

Following his presentation, both gentlemen are available to answer your questions. And with that I'll hand it over to Reinhard.

Yeah, thanks Florian. Ladies and gentlemen, good afternoon and thanks for joining us today.

The start to 2019 was solid, but softer than expected given the weaker macro environment and the difficult security situation Libya. Let me start by briefly reviewing the economic environment.

Rent increased from the low level of $53 per barrel at the beginning of the year to $68 per barrel by the end of March, averaging $63 in the first quarter of 2019. Main drivers were renewed U.S.

oil sanctions on Venezuela, lower OPEC plus production, the market expectation that OPEC plus supply cuts will be continued until June and a more positive outlook for demand. However, on average rent prices were down 6% year-on-year and 8% quarter-on-quarter.

European gas prices were 5% lower year-on-year and 22% down compared to the previous quarter. The price decline was mainly caused by warmer than normal temperatures and above average storage levels across Europe.

In addition, the slower growth of Asian LNG demand coupled with a ramp up of U.S. supply glistened the global supply situation significantly.

As a result, substantial LNG volumes targeted to northwest Europe during winter months. The refining indicator margin started the year on a week note.

Although it's improved slightly in February-March, the first quarter of 2019 was the weakest quarter since 2016. The margin declined 16% year-on-year and 23% quarter-on-quarter.

Gas oil and fuel oil cracks came down from the high level seen in the fourth quarter of last year, but remains strong. Lite distillate cracks decreased sharply due to the global over supply of gasoline.

Gasoline and propylene margins were flat year-on-year, but declined by 10%, compared to the fourth quarter of 2018. Although butadiene margins came down 30% from the high levels recorded in the fourth quarter of 2018.

They were 35% above the prior year’s quarter. Benzene margins fell sharply both on year-on-year and quarter-on-quarter due to oversupply in the market.

Let me briefly point out the key developments of the first quarter of 2019. The weaker economic environment and the temporary shutdown of the Al Sharara oil field in Libya negatively impacted our upstream earnings.

On the other hand, downstream earnings were very resilient despite weaker refining margins. Our cash generation remained very strong with the cash flow from operating activities of €1.2 billion, excluding networking capital effects.

At the operational level, we recorded a strong performance both in upstream and in downstream. We further increased our production to 474,000 barrels per day and reduced the average production cost to $6.80 per barrel.

However, the sales volumes could not follow the increase in production as we had no liftings in Libya. In downstream, we continue to run our refineries at an exceptionally high realization rate of 98%.

In the first three months of this year, we made significant progress towards our strategic goals. In January, we signed the acquisition of a 15% share and at ADNOC Refining and in it to be established global trading joint venture with this transaction OMV expands downstream internationally and establishes a strong integrated position in Abu Dhabi along the value chain spanning from upstream production to refining and trading and petrochemicals.

The transaction is expected to be closed in the third quarter of this year. In February, we closed the acquisition of a 50% share and the new company SapuraOMV upstream.

In March, we signed two memoranda of understanding with ADNOC to explore new opportunities for collaboration in the petrochemical sector and to assess the feasibility of a scalable oil plant in the United Arab Emirates. Let's now turn to our financial performance of the first quarter of 2019, the Clean CCS operating results came in at €759 million down 7% compared to the first quarter of 2018.

As mentioned already, our results were negatively impacted by the temporary shutdown of El Sharara feed in Libya for most of the quarter. Despite the risks that in March we had no oil sales in Libya in the first quarter of 2019.

As a consequence, sales of 2.9 million oil barrels were missing with an earnings impact of approximately €140 million. Additionally, we recorded €106 million higher depreciation, mainly due to the acquisitions in New Zealand and UAE as well as SapuraOMV in Malaysia.

The Clean tax rate was 34% and thus on a similar level as in the previous year's quarter, Clean CCS net income attributable to stockholders amounted to €346 million, 8% lower compared to the first quarter of 2018. Clean CCS earnings per share came in at €1.06.

Let me now come to the performance of our two business segments. The upstream Clean operating result decreased by €45 million to €393 million compared to the first quarter of 2018 due to the lower oil sales volumes and higher depreciation.

Market effects had a positive impact of €98 million compared to the first quarter of 2018. OMVs realized oil prize rose by 3% while the realized gas price increased by 5%.

This was due to higher gas prices in Romania and to two month's time lag effect for half of our Russian gas volumes. Therefore, the high level of the European gas market in the fourth quarter of 2018 is partly reflected in our realized prices of the first quarter 2019.

Production went up by 37 to 474,000 barrels per day, mainly driven by the acquisitions in Abu Dhabi, New Zealand and Malaysia, as well as the production ramp up of Aasta Hansteen in Norway. New Zealand and Malaysia were not yet fully reflected in the first quarter production, as there was plant maintenance at the Pohokura field and SapuraOMV was only consolidated as of February.

The aforementioned shutdown in Libya, the natural decline in Romania and the divestment of Pakistan in the second quarter of last year had a negative impact of some 30,000 barrels per day in our production compared to the first quarter of last year. Despite an increased production, our overall sales volumes were flat year-on-year as higher gas sales were offset by lower oil volumes.

The negative net impact of €56 million in our operational performance was especially caused by the missing oil volumes from Libya to the amount of approximately €140 million. We reduced our production cost by 8% to $6.80 per barrel on the back of higher production and favorable currency development.

Depreciation increased by €87 million due to our acquisition in the UAE and Asia Pacific. In Downstream, the Clean CCS operating result was almost flat at €374 million.

The Downstream oil result increased by €17 million to €299 million, despite lower refining margins. Ethylene and propylene margins were flat.

Our operational performance was again strong, driven by the exceptionally high refining utilization rate, higher volumes, as well as good retail and commercial margins. The commercial business in Germany and Austria benefitted from the supply situation in southern Germany impacted by a refinery outage.

At €70 million the petrochemicals result was almost stable. The contribution from Borealis decreased to €72 million following lower polyolefin margins, negative inventory valuation effects and plant turnaround of Borouge III.

The performance of the fertilizer business improved due to lower gas prices. The Clean CCS operating result in Downstream gas declined from €94 million to €75 million, mainly attributable to a lack of arbitrage opportunities in the first quarter of 2019 and the lowest storage results than in Q1 2018.

Natural gas sales volumes increased by 15% mainly driven by our successful marketing initiatives in Germany and the Netherlands. Let's now continue with cash flow.

The first quarter was again strong with an operating cash flow of €1.2 billion excluding networking capital effects. This was driven by OMB’s good operational performance and the changes in our portfolio.

We received the second 2018 dividend tranche from Borealis to the amount of €144 million, compared to €252 million in the first quarter of 2018, for the full year 2017. This reflects the change in Borealis dividend payment for annual to twice a year.

Mainly following a significant increase of inventories in downstream oil, we recorded negative net working capital effects to the amount of €330 million, €234 million more than in the first quarter of 2018. Organic cash flow from investing activities amounted to €448 million.

The organic free cash flow decreased by 35% to €418 million primarily as a result of the net working capital effects. Turning to inorganic cash flows, divestments amounted to €62 million and the cash outflow for inorganic investments totaled €604 million mainly reflecting the acquisition of the 50% share in Sapura OMV.

As you know, IFRS 16 is effective since January 1 of this year, I would like to explain to you the impact of this new standard on OMV. IFRS 16 eliminates the distinction between an operating lease and a finance lease.

Under the previous standard, operating leases were held off the balance sheet and finance leases were reported on the balance sheet. According to the new standard, all leases are now reported on the balance sheet.

As a result of this change, we recognize an additional liability of approximately €700 million from leases in our balance sheet. Our net debt rose by approximately €700 million leading to a gearing ratio increase of around four percentage points.

IFRS 16 also impacts CapEx by approximately €150 million, based on our current estimates, as all qualifying leases will be included. Our 2019 organic CapEx guidance of €2.3 million already covers this effect.

Looking at the impact on our income statement, we expect an additional depreciation of €90 million as operating leases expenses are now reported as depreciation and interest. The impact on both, the operating result and net income is only minor.

Last but not least, we expect an increase of approximately €85 million in our free cash flow reflecting the classification of the principle portion of the lease payments as financing cash flow. OMV’s balance sheets remained very healthy and showed strong liquidity with the cash position of €3.7 billion at the end of the first quarter of 2019.

Net debt increased to €3.2 billion, mainly stemming from the implementation of IFRS 16. Our gearing ratio increased to 20% however on a like-for-like basis, excluding IFRS 16 impact, our gearing ratio rose only slightly to 15%, compared to the end of 2018.

Let me now conclude with the outlook for 2019. We reconfirm our 2019 market assumptions for crude oil and gas prices communicated at the beginning of the year.

Refining margins are now estimated to be below $5 per barrel, given the weaker than anticipated beginning of the year. For the remainder of this year, we expect an average production of 500,000 barrels per day.

However, this depends on the security situation in Libya. We assume that Libya would contribute some 35,000 barrels per day in the remaining three quarters of 2019, thus for the full year of 2019, we anticipate the total production of around 500,000 barrels per day.

In the second quarter, we estimate a similar market environment as in the first quarter of 2019 but a better performance in upstream production of El Sharara is back on stream, as we already had liftings in Libya. Thank you for your attention.

Now Reinhard and I are more than happy to take your questions.

Thank you, Rainer. Now come to your question, I'd ask you to limit your questions so only two at a time so that we can take as many questions as possible.

You can of course always join the queue for a follow-up question. The first question comes from Mehdi Ennebati, Societe Generale.

Hi, good afternoon and thanks for taking my questions. So first question regarding Libya, obviously, so the production we started and you are now producing close to plateau.

But I would like to know if you are able to export the crude from Libya in an optimal way, that to avoid being separate in a way [indiscernible]. And can you also make an update regarding the situation at El Sharara oilfield, there are some information saying that it might have been shut.

And can you also make us an update regarding the Zawiya oil terminal, so who is also controlling the Sharara oilfield and who is controlling Zawiya oil terminal piece? Second question on the cash from operation, net working capital, which came in line with the first quarter 2018, while as you did not sell production from Libya and you received only healthy dividends from Borealis.

So how have you been able to mitigate those two negative impacts at the cash from operations level, did you receive enough cash on your Russian assets than last year? Is your new production from New Zealand or Abu Dhabi, more cash generated than your average production, just would like to understand here please, how have you been able to realize such high cash from operation?

Thank you.

Mehdi, I propose that Reinhard just taking your long question, your very long question. And I'd take the short one on Libya.

Okay. Reinhard, anyhow has more understanding of you and to the cash flow.

So first of all, we have no impact on our operations in El Sharara so far since we restarted the production everything is running smoothly without any interruptions, no technical problems, no security problems so far. So knock on wood, we also can export the crude.

And as I have said, we have sold already some cargos from our Libyan production so that we have no restrictions as we speak about the situation. I don't know how I should answer your question, who is controlling what in Libya?

I don't know how I should answer on this. All I can say is the situation around our production sites in Libya hasn’t changed.

Everything is safe. The security guards are the same.

We have no interference from political point of view. So therefore from my point of view, we are expecting that or though the situation in Libya is a pretty fragile.

We are expecting that we are going to see a stable production also in the second quarter. Rainer, now it’s up to you.

It’s Reinhard speaking. Hello, Mehdi.

Hi.

Regarding your question, where does the free cash flow come from? It comes from our very strong operational cash flow that we are producing.

So there is no special effect in there that is specifically distorting this number. Just one comment on the Borealis dividend.

You said we have received lower dividend from Borealis. This is true for quarter one, but in between 2018 and 2019 that has been the decision to split the dividend in two portions.

So that we have received also a portion in third quarter in 2018 and we will receive the same also in 2019. So you cannot compare the dividend directly between the quarter one dividend of Borealis in that sense.

But then regarding the cash flow of course, you have to take into account that the impact from Libya missing on the cash flow due to the higher tax situation in Libya is of course, smaller. And that the average tax rate that we have seen in quarter one 2019 therefore has been lower, which had a positive impact on the cash.

All right. Thank you very much.

Thanks, Mehdi. Next question is from Josh Stone, Barclays.

Hi, good afternoon. Thanks for the presentation.

I’ve got two questions, please. First if I can follow up on Libya, you had an under less thing position at 1Q, do you expect to get those volumes back and then, do you think you could actually move into an overlapping position at 2Q and try and get back some of the lost sales volumes at 1Q?

And then secondly on the gas realizations that clearly held up despite the fall in the hub pricing, you mentioned the lag effect and also Romanian gas pricing. Can you give us some, I would have thought the direction to 2Q would be down given that lag effect, perhaps you could help us understand the magnitude of that decline, some of the moving parts there and if there’s any dates of April, you could provide that would be helpful as well.

Thank you.

Well, Josh, you are absolutely right. We have produced some oil in the first quarter, which we could not market and not export from Libya.

This oil is moving into the second quarter. Definitely this has an positive impact on Q2.

When we talk about the gas lag effect, you’re also right, yes. With the two months time lag effect, we do have on our gas prices and give them the fact that Q1 gas prices were below the Q4 gas prices of 2018.

They are a lower gas prices waiting us in the second quarter.

So presumably, you can’t help us on favoring magnitude that decline well just run. We have any – I guess we can figure it out, but thanks.

I think you have to run your calculation yourself.

Fair enough. Thank you.

Okay. We now move to Jason Gammel, Jefferies.

Thanks very much. Two questions on the downstream if I could please.

The first, you’ve obviously been able to preemptively schedule all your maintenance to be able to run full for the back half of the year and into 2020. Can you give us some idea of when you think we might start to see a wider spreads – in stronger cracks on middle this, what’s that are related to IMO.

And is that something that you’ve built into the margin forecast for this year? Second question, there’s obviously been some interruption in Russian pipeline oil being delivered recently.

I don’t think it directly affects your crude supply, but has it had any effect on your crude sourcing and pushing up your oil prices that could negatively affect the 2Q margin? Thanks.

Well, great questions, Jason. Let me start with your second questions on crudes from Russia.

First of all, we are not impacted by the situation at all, because we get all our crudes via our cargoes in Trieste, yes, in Trieste and that's the supply route for our refinery. So we are not impacted.

But I agree with you, as I have seen no real clear message in the market, how long the situation will last. It might have an impact in the mid to long-term on the euros differential, which was already a pain in the neck in the first quarter.

One of the reason why our refining margins we have seen in Europe is that the euros differential was not in favor, especially for the Eastern European refineries. Yes.

So that's something which might give another downsides for the refining margins in Eastern European countries. Especially, we have to see that heavier crudes globally is now running short given the fact that the sanctions on Venezuela and Iran really a good using this quality.

And it's increasing the call for crudes from Russia. The cracks on middle distillates, if I would have known this.

Well, first of all, when we look into the first quarter, we have seen that there was a real oversupply in the market from benzene and naphtha as well. We benefited from naphtha and our petrochemical business, but we have seen now that there are higher cost for benzene, but lower cost for diesel.

What I'm expecting is that in the second quarter, we might see a higher demand, especially in Europe picking up absorbing a little bit the oversupply situation we see with middle distillates in the market. Do I see there a quick and a very strong return in middle distillate margins, definitely it will depend on the situation, the U.S.

and in Asia. Because right now we see high imports, especially from the United States into the European markets as demand as they've pretty low.

The question on IMO, we see now IMO really moving into the market, which says lower call for heavy fuel oil. So we don't see it as a shift to the other product groups.

What do we see is that the market is asking for less heavier HFO. And therefore we do see a very low cracks and prices in the HFO market.

This will continue. We are expecting and calculating was positive IMO margins in the fourth quarter and on a very, very low level and as the new regulation will come in force on 1 of January next year, I think it would start with 2020.

That's really helpful, Rainer. I appreciate it.

Thanks, Jason. Next question is from Thomas Adolff, Credit Suisse.

Afternoon. Two questions for me as well.

Just going to your 2019 production guidance of about 500,000 barrels per day, and in your press release and your presentation you say, that requires at least 35,000 barrels per day from Libya. So is it fair to say that you are running was a fairly limited contingency buffer for the rest of the year and if there's a contingency buffer.

How big is it, perhaps you can talk around that? And secondly regarding SapuraOMV, I know it's only been a few months, but now that you sit inside of the company, perhaps you can talk about your first impressions of SapuraOMV.

Thank you.

Thomas, regarding your first question on the 500,000 barrels. We clearly have seen in first quarter, we missed out on the 500,000.

However, with things going the right way, we are expecting to be able to have production around 500,000 for the rest of the year. Now we are estimating the 35,000 barrels from Libya that's not unrealistic.

So if there are no interruptions with the fields that we have in the East end and in the Western side from Libya together, we are at the level of producing 35,000 barrels. So there's no need for a contingency in there.

If you would ask for how much contingency at both the 500,000, we have. We are not guiding under the impression of contingencies.

So we think this is the fear assessment on how our production currently runs. And this is the way how we also would like to give the message to you.

So don't think we are hiding any contingencies in our guidance there.

Thomas, your question on the Sapura, I would like to headline it, lower costs and higher production than plant. So the company looks much better from our operational point of view then we have anticipated when we negotiated the terms to enter Sapura.

What we see is that a major priority has now financing of the projects we do have in the pipeline. We will speed up the projects and we have really a very welcome situation in the company, because we would like to bring in now our development expertise, especially when it comes to a higher CapEx spending.

We should and conclude and say, we don't regret that we have done such a good deal.

Okay. Thank you.

Next is Michele Della Vigna, Goldman Sachs.

Thank you for the presentation. Certainly it is a very busy year in terms of transaction with Achimov Sapura refinery.

I was wondering if you could give us an idea of where you expect the gearing to be at the end of the year? And also I was wondering if you could walk us through the progress in the north stream project?

Thank you very much.

Your question regarding year end hearing, of course, it's very much dependent on the conclusion of Achimov and at which conditions. So as Rainer has always emphasized, we are in the process of negotiations and we are still of course, confident that we'll be able to conclude that.

This is something where we would still see ourselves eating up a significant part of our headroom that we have against our target. Maybe even the whole of it.

However, let's be sure, we are looking at the gearing currently at a situation where of course IFRS 16 distorts this number a little bit. And we said that we have an impact of 4% to 5% just from the IFRS 16.

So this is not something that we would measure ourselves again in 2019 if it comes to the headroom that we have left for our acquisitions. But regards to what exactly the level will be.

Let's be surprised when we will be able to give you good news on the transactions going forward.

Yes. Michele, we are not seem to – well first of all, I have to say, we are within time and plan with the project, which says also within budget we have now financed including the Q1 contribution, €640 million as OMV share.

The project now I think, I work a little bit on the progress because you read so many numbers, how many kilometers are already constructed, yes. Right now, 1,100 kilometers of the pipeline up to two lines are constructed.

As we are building two lines each around 1,200 and let's say 50 kilometers is a bit less here. But 1,250, so in total 2,500 kilometers of Nord Stream 2 two lines have to be built.

Given that we have now build 1,100, something between 40% and 45% of the pipeline has been late already. We have moved now our laying activities into Russian waters.

We are going to construct in the next week around a 100 kilometers in the Russian sector and connecting especially with the injecting point in [indiscernible], so that we are going to have the first session more or less in place. The main topic on our agenda as we speak about, what do we need to finalize the project is the remaining permit from Denmark.

As you have seen the press Nord Stream 2 Company has applied the environmental – are delivered the environmental impact assessment study for third line. We have a now three lines to be discussed or three routes to be discussed with the Danish authorities.

I'm now calling for a click decision from the Danish authorities. They know the project since and return it to you already.

And on a non-discriminatory basis, I expect to see that decision coming as early as possible so that we do know, which laying bots we have to send where so that we can connect the two pieces of the pipe. As we asked to speak about the third energy packets with the amendments, we have to wait and see how this is going to be implemented into German law.

Then I can give you an idea of what kind of impact this will be. It will have on the project.

Thank you.

Next question is from Peter Low, Redburn.

Hi. Thanks for taking my questions.

Your organic free cash flow generation has been very strong over the past couple of years, but that's been somewhat masked by significant inorganic spend. We're now coming to the end of those acquisitions.

And how would you think about the use of that free cash flow going forward, kind of thinking, coming from the longer term perspective? And then secondly, just on commodity hedging, can you confirm whether you have any hedges in place for either oil or gas volumes this year

Regarding your first question, regarding the free cash flow use, we have given a set of new priorities actually in the use of our proceeds from our business. Of course, everything which is, I would say, the organic investments, everything that is mandatory and maintenance stays a priority number one, in order to keep the quality and integrity of all our operations and assets.

We have moved up to priority number two, the payments in dividends. Why is that, because we went to be heard very loud and clear about our dividend policy.

That is a progressive dividend policy where our aim is to increase dividends year-by-year, or at least keep it at the level of the past year. Priority number three, is deleveraging.

And, as I have mentioned in my last comment about gearing, you can see that, of course it will be our target for the near term to regain the headroom again after successful acquisitions, and therefore this is priority number three. And then priority number four, is the continuation of growth.

It's only a priority number four, because we said, actually on big transactions we would take a pause for now as we have a lot to consolidate and bring to the levels of our operational aspirations. And we have been very successful in very short term about these acquisitions, but that's the use of the free cash flow.

that we will be producing over the next year. Your second question was about hedges.

And yes, I can confirm that there are no commodity hedges for oil or gas in place on our Upstream side. So we have more or less dissolve the hedge, on the gas side in January, and therefore today, no hedges in place.

Next question is from Henri Patricot, UBS.

Yes. I want to thank you for the update.

I have two questions, please. The first one just on the tax rate and guidance for the full year 2019, whether the guidance around 40%, and whether we should expect a bit spike in the second quarter as you have more from Libya, and then slightly lower in the second half of the year, I mean stable macro environment.

And secondly, I was wondering if you can give us an update on your discussions in Romania, regarding the regulatory environment, and what it means for possible and attending?

Regarding the tax rate. Yes, I can confirm that we keep our guidance or the 40% for the full year up and it is right that our tax rate of course has been more beneficial in the first quarter, as we do – did not have any kind of listings in Libya.

As we will catch up at least for the production volumes for almost one month from Q1 – in Q2. We can't expect the tax rate will be slightly higher in that area.

And then we'll be on normal levels which we estimate to be around 40% for the rest of the year.

Well, on Romania, our local pattern management is in a very intensive and deep dialogue with dialogue with the Romanian government, with different ministries and we are – we are definitely seeing a little bit of progress. If we remember the gas cap for the next three years has been reduced as an impact to the market limited to a lower market segments.

So, I would say that’s all positive news, I can give you Henri, sorry to say. And because it’s only this, it’s not enough to go for a positive FID.

We need to have further fiscal stability, especially a clear commitment of the Romanian government to a Libya’s [ph] market. And of course, we also need the key infrastructure in place.

I know that the tender for the RoHu pipeline will expire end of this month. So therefore I hope we will have more clarity, if not that there has to be further a prolongation of the tender for these capacities.

And it takes two to tango, we have a partner Exxon who also has to say yes, we are fully aligned in such a partnership. And right now the, framework, the regulatory framework and the fiscal framework we see on the table is not sufficient to initiate or to start our approval process internally.

Your question when it will be, this is a crystal ball, which is pretty foggy at the moment. Yes.

It all depends not on us. It depends really on the Romanian government to come up with the satisfying framework for us.

Next question is you Yuriy Kukhtanych, Deutsche Bank.

Thank you. Well, first of all, gentlemen, congratulations on the results.

I think the excellent given the environment in Q1. I’ve got two questions.

One, around your production. We have some issues in after constrained was a pipeline leakage, production was short there.

If you could just update us on the current situation? And also in Romania, it seems like production decline is accelerating in the past two quarters.

So, I was just wondering how I look in at your or how are you feeding these two events into your 2019 average production guidance, so 500,000 barrels per day. That would be my first question.

And the second one, it’s a little bit more abstract about Gazprom’s senior management departures. If you could just comment whether these departures in the beginning of the year in any way impact or the timing or potential timing of the Achimov deal or any other of your activities in Russia?

Thank you.

Well, Yuriy, as to speak about the production in Romania. You absolutely right, that we are now estimating a higher decline rate.

Given the unfavorable changes of the framework of the Romanian government, especially the gas price cap, the decline rate, which we formerly guided with 3% per annum. We are now expecting a 5% decline rate per annum.

This is one of the consequences we have to swallow because we have reduced our CapEx program. We have to reduce our CapEx program in Romania, because some of the gas projects given the new regulatory framework did not calculate a positive rate of return for us.

And that’s the reason why a patch management decided to reduce the CapEx program for 2019. And that’s why you do see a higher decline rate in a patch from then.

We have guided in the past. The second question on Gazprom Management, well, I do regret of course Alexander Ivanovich Medvedev has left the board forever reason, but he was replaced by [indiscernible], which I know since an eternity, because she was running Gazprom export.

And as you know, we have done really very progressive activities together with Gazprom export. We prolonged our gas contracts with her; we increased our volumes with her.

We have done some separate good transaction. So we are very much used to.

And now I have to talk to her. Is this in any way, delaying our agreement on Achimov IV/V?

let me say the risk is there. I agree with you Yuriy, because Helena was not involved when we negotiated Achimov IV/V with Alexander.

But this transaction has a priority and of course, she needs some time to get familiar with that, but I do expect that we are going to find each other on the final terms on the purchase price during the summer while the summer goes until September. From my point of view, that’s a late summer, because I was born in September and I see myself that I’m a late summer boy.

So, that’s why, that’s why, I think, to be fair, yes. Potential risk is there, but let’s wait and see.

I’m a little bit relaxed Yuriy, honestly speaking, because the NPV of the value of the asset is really changing as in the negotiations the day we was have – see we are going to see the first production and this is anticipated in 2021. and therefore I do have two years left, which I don’t want to use.

I hope it’s only until latest end of some of this year.

That’s great, Reinhard. Thank you so much for the comprehensive answer.

If you could just comment very briefly of Aasta Hansteen as well. Thank you.

Yes. On Aasta Hansteen, you’re right there has been short shutting, in order to repair a leakage of evolve, which is actually not an total unusual thing if you have a new startup that these things will have to be fixed over the time.

I can confirm that Aasta Hansteen has been protopic and in this producing.

That’s great. Gentlemen, thank you so much.

The next question is from Alwyn Thomas, Exane BNP Paribas.

Hi, good afternoon team. I was trying to ask just on production going to – into summer months and into 2Q.

Outside of Libya returning, maybe just discuss some of the moving parts, particularly on the Russian gas volumes we expect that now, given we get gas prices in Europe and whether there might be more than the usual sort of seasonal impact there. And secondly, last quick question is there €140 million impact from Libya for the quarter, generally a good benchmark for future quarters?

Thanks.

Well, I'd take your second question because I have to work a little bit on your first one. The € 140 million is not a benchmark for the next quarters.

It really depends how much liftings we are going to see in Libya and that’s determining the impact. All I have said is that a little bit of the Q1 is now moving into Q2.

That's all I can give you as guidance, which tells you in Q2, it must be at least € 145 million.

Okay.

Instead of € 144 million, which we have seen in the Q1, alright and what we see – your question on the gas volumes in Russia, we have normal seasonal impact in summer and annual maintenance in the third quarter. So that's the reason why we are going to see a lower production level in fusion of those [indiscernible] in the summer quarters.

But this is a typical profile we have every year. That's also why we are guiding the 100,000 barrels per day in average for the total year.

But if we see – it's a little bit more in the winter quarters, Q1 and Q4 and a little bit less in the summer quarters. That's a normal profile, by the way, fully aligned with the consumption in the market.

You don't do me the favor you need to heat your house in summer, I would supply the gas to you, but you don't want it and that's the reason why we have such a profile.

Okay. But that is no, just to be clear, you don't expect any specific impact just because gas prices in Europe has been weaker?

Nope.

Okay. Thanks.

Next question is Chris Copeland from Bank of America Merrill Lynch.

Thanks. I've got a few crumbs left so hopefully there'll be quick.

Firstly, two on IFRS 16, you're indicating on your slide there is a positive impact on free cash flow and on CapEx, can I add the two numbers up to get to an impact on operating cash flow? That’s the question number one.

Secondly, the decline in units OpEx in the first quarter, can you confirm whether or not that is in fact IFRS 16 related? I would expect somewhere OpEX goes down and depreciation is going up.

So that would be helpful. And if I may one more question on the Borealis dividends that you highlighted being split into two payments.

Is it a 50-50 split? Do you already know how much is coming back to you in the third quarter?

Thank you.

First coming to your questions about IFRS 16, the impact on IFRS 16 is actually one where CapEx goes up and the reasons for CapEx going up is that of course there are always some of these lease contracts, going out and some coming in. And of course you have to then see that the level of the overall net debt where we said is around 700, that we did buy more or less January 1, is coming up, part of that will then go down again, but a little bit more will come up in the CapEx.

So you cannot add up the full number of CapEx to free cash flow impact. Whereas of course the free cash flow impact.

Whereas of course the free cash flow is a positive one. We said it's 85 million for the full year.

And that more or less comes in from the 90 million that we see on the operative side as the differential plus a very small negative impact on net profit of five. So that's more or less the differential that that you have here.

In general, you would see of course OpEx going down a little bit, but then you also have to take into account it's not only depreciation that you have, you also have some interest. Therefore, you see, while there's a small positive impact on the operational result.

There's a small negative impact on the net result. That difference is more or less the interest part.

On the Borealis dividend, now that's not necessarily the case that we have a 50-50 between the first and the third quarter. This very much depends also on the operational performance and the investment plans of Borealis.

So therefore, we are guiding only on what we have seen for Q1, but there is of course something to be expected in Q3.

Thank you. If I may – can you confirm or not whether the unit OpEx decline in Q1 it’s not assumption of IFRS 16.

Yes, I can confirm that if I know the function of IFRS 16.

The next question is from Oleg Galbur, Raiffeisen Centrobank.

Yes. Good afternoon.

I have two short questions. The first one on the upstream production, in Emirates, you recorded the level of 22,000 barrels a day.

And if I remember correctly, I might be wrong, the level guided for this year was 30,000 barrels. So if that's the case, could you explain – could you tell us when do we expect to reach this level?

And the second one is on depreciation, if the level of €560 million reached in the first quarter, a good indication for the remaining quarters. Thank you.

Let me start with the second question. I think it's very fair to say that there is – on the depreciation side with the acquisitions and the additions in capital employed that we had a good indication for this level to continue for the rest of the year.

Of course, if there are further acquisitions and further additions on our capital employed, there will also be additions on the depreciation.

Your question Oleg on the United Arab Emirates, we can't give you an indication for 2019. All we have said so far is that we expecting to see the plateau production, which will be 43,000 barrels per day in 2023.

So we will have a step up in the production. Yes, but the years in between we are not giving any guidance.

Understood. Thank you very much.

We have a follow-up question from Thomas Adolff of Credit Suisse.

Thanks for taking my follow-up question. I just wanted to go back to your comment on Achimov.

You just mentioned on the call that you expect production to start in 2021. When I go through the transcript from the 4Q results call, you've mentioned production is estimated to start at the end of 2020.

Now my question I guess is, is there a delay on Achimov or have you just simply rounded it down to 2021? Thank you.

All right. Well, Thomas, now we can discuss whether it's 31st of December or 1st of January.

Now I don't do that, there – we don't see any delay in the project, yes. We just have said, okay, come on, there can be a swing into the first quarter of 2021, that's why I'm more on the safe side, yes.

Given the fact that I'm negotiating now Achimov 4/5, you might understand that I see it in the negotiation bore in 2021, then in 2020.

Okay. Thank you.

Next question is from Bertrand Hodée, Kepler Cheuvreux.

Yes. Hello everyone, a follow-up question on Chris question on IFRS 16 impact.

So you have disclosed a lot of impact from IFRS 16 free cash flow of CapEx, but you did not disclose the impact on the operating cash flow, and that must be one. So can you give us that number for the full year?

And also can you disclose, if you have that in mind, if there was any positive IFRS 16 impact on your €1.2 billion operating cash flow in Q1? Thank you very much.

Actually the number that we have given for the free cash flow is the same as – the operating cash flow, there are no detection in between. So therefore, the impact that we are seeing actually is the same €85 million, that I've given you before as impact on the free cash flow.

So that's more or less the impact that we are seeing. And that's more or less ratio that you see compared to what we have on the first quarter impact that we are seeing at the moment.

Okay.

Yes, on the CapEx, we have said it's around €150 million that will be in addition, but as Rainer said in his speech, the CapEx is included in our guidance of the €2.3 billion operating CapEx of this year.

Okay.

Good. So thank you all for joining us today.

This brings us to the end of our conference call. Should you have any further questions, please contact the investor relations team, we will be happy to help you.

Have a good day and goodbye.