Q3 2020 Ecopetrol SA Earnings Call
Welcome to Echo patrols earnings conference call in which we will discuss the main financial and operational results for the third quarter 2020.
All lines have been muted there will be a QNX session at the end of the presentation before.
Before we begin it is important to mention that the comments in this call by Ecopetrol Senior management include projections of the company's future performance. These projections do not constitute any commitment as to future results nor do they take into account risks or uncertainties that could materialize as a result ecopetrol us.
Films no responsibility in the event that future results are different from the projections shared in this conference call.
The call will be led by Mr., Philippe while young CEO of Ecopetrol.
Rectal once we have that see Oh.
And Jaime <unk> CFO. Thank you for your attention.
Mr. By Young you May begin your conference.
Good morning, everyone and welcome to this conference call, where we will discuss our operating and financial results for the third quarter of the year. We hope you and your families continue to be safe personal and social awareness continue to be key elements to overcome the health emergency that we have experienced during 2020.
The third quarter of the year was characterized by a better operating and financial performance associated with a gradual increase in our operations and aligned with demand recovery. These ramp up has been reflected in higher operational activity levels. For example, the nickel with that Alicia where we've had an increase of.
Active drilling rigs from two rigs in April to 10 rigs by the end of September Likewise in order to preserve our employees' health and safety our field personnel have progressive you return to their onsite work since June under strict biosafety protocols to date, thanks to our digital transformation program.
About 75% of our employees continue to work remotely.
Although we will remain working remotely during 2020 to preserve social distancing measures. A pilot plan was launched in October that will allow us to be prepared for a sales and state of return of our office employees to the companys facilities in Twentytwenty, one as part of our adaptation process. So the new norm.
This pilot considers a flexible scheme of staff and infrastructure, which will allow operational optimizations and will generate efficiencies to the equity through a group within these process. We highlight the crucial role that any increase digitalized operation. During the year has played through the use amongst others have.
Artificial intelligence and the implementation of analytical and sales management tools right.
Regarding the health emergency caused by COVID-19 through our social investment program. Appfolio plays we have executed 59% of the approved investment in line with the Equitrust group commitment to the well being of Colombians as well as you recall very and reactivation and strengthening of the local economies that move.
On to the next slide to these costs market conditions.
After coping with one of the most difficult quarters in recent years during the third quarter, we witness a gradual recovery of the market, reflecting in a 30% increase in Brent prices, which rose from $33 per barrel at the end of the second quarter to $43 per barrel by the end of the third quarter local demand.
And for our main products improve when compared to the trend observed in the first half of the year highlighting our recovery in sales volumes of around 110% by the end of September compared to the lowest levels observed in April demand recovery allowed us to return to the sales level observed in early March and these are.
Wins of the easing of Lockdown restrictions that have resulted in reactivation of the economic activity on the other hand, we also highlight the significant recovery to $38 per barrel of our crude sales baskets compared to the second quarter when the basket stood around $20 per barrel. However.
Yes, we still continue with price levels similar to those observed in the crisis of 2016.
Let's move onto the next slide for a summary of our third quarter results.
Our operating and financial results perform better when compared to the second quarter in line with a recovering prices and better demand conditions Echo Petros group production reached 681000 barrels of oil equivalent per day that is 3000 barrels more when compared to the second quarter the higher production at.
Along with price recovery resulted in a 46% increase in revenues as compared to the second quarter of 2020, despite some difficult security events that have impacted our operations. During the year Ecopetrol reached an EBITDA of 5.3 trillion pesos and a net income of 855 billion pesos in the third.
Order and I'll give the floor to embed took on Swager, who will provide further details of our operational results for the quarter.
Thank you for Libra.
During the third quarter, we saw a gradual recovery of our operating results aligned with domestic demand recovery on a higher price levels on exploration, we drilled three wells totaling 10 wells over the year.
We expect to exceed our 2020 targets with 17 wells drilled four more than originally planned due to the inclusion of three wells through joint operating agreements on the appraisal of the trajectory well on extensive field test was carried out in there to see if that one sidetrack well.
A gas discovery drilled by Hocol in 2018.
Sales began on October 1st with the production of 3.5 million cubic feet of gas per day.
I would like to highlight the commercial agreements, our chief Bible Colon Luis energy. So the exploration of natural gas in the frontier play into produces block located in the department of Health plan.
Currently the assignment of local interest to Louise energy is subject to the A.N.H. approval of growth. We continue our progress in completing the appraisal phase of the GAAP to D'amato project Ecopetrols group's production reached that competitive advantage of 698000 barrels of oil.
Equivalent per day.
We expect the production year to 700000 barrels of oil equivalent per day by year end line up with our target for the year.
Additionally, the Ecopetrols group Lunched run Dotcom post 2020.
An initiative to offer its entire stake in nine development and production assets six of them owned by Hocol on three by Ecopetrol. This asset divestment process is part of the company's portfolio turnover and supports Ecopetrols group strategic pillars during the quarter we test.
The transport in heavy crude of 650 cents. This dose in some of our main pipeline systems, which will allow us to have greater dilution efficiencies. Currently we are analyzing the economic feasibility of the scheme. The downstream segment presented operational stability alone its business.
Units the refineries reached a combined gross margin of 7.4 dollars per barrel on a consolidated throughput of 324000 barrels per day looking into these figures. It is worth noting that as of September the refineries reported a 50% recovery of the throughput levels.
Versus April our most critical month in 2024 year end, we expect the consolidated throughput within the range set for 2020 between 300 and 320000 barrels per day. The Cartagena refinery achieved two monthly records during this quarter at full capacity throughput exclusively.
With domestic crudes in September and an average distillate yield of over 65% in July in our petrochemical business SNCF continues to exhibit a remarkable operational performance during the quarter. It reported historical polypropylene production highs on sales volume records.
Please continue on to the next slide to review our gas initiatives.
Our gas operations posted an EBITDA margin of 55% and contributed close to 34% of the upstream segments EBITDA gas and NGL production reached 141000 barrels of oil equivalent.
An increase when compared to the same period of the previous year, mainly due to the effect of the acquisition of Chevron's seem derisk in they will eat up fields and the commercial monitoring for Gastroplus is due to the increase in the month Ecopetrol maintains its social investment in natural gas aiming to connect.
At least 18000, new users by 2024.
Through this initiative 692, new users have connected us off September of this year.
During the third quarter, we completed the 2020 natural gas commercialization process from major fields, our commercial strategy allowed us to contract a 100% of the client's needs in contracts with the duration ranging from one to seven years. Please let's move on to the next slide in Colombia.
The regulatory framework to develop the comprehensive research pilot projects is in place. So we may move forward with the HMH contractor selection process for the assignment of the special research projects contracts set.
If we are awarded with a contract we would begin the process of obtaining environmental licensing before the authorities regarding our business in the Permian Basin in Texas as you May recall, we resume activities in late July with two rigs currently in operation together with our partner Oxy during the third quarter, we drilled five new.
New wells by the end of 2020, we expect to have 22 wells in production 22 wells drilled to be completed during the first quarter of 2021 and an estimated average net production for a couple of drove in a range of 5000 to 5500 barrels of oil equivalent per day.
Before Roger.
Let's move on to the next slide in order to lease goes our airports in terms of costs for 2020, we have incorporated 3.5 trillion pesos in savings into our annual plan, which have been gradually reflected in the company's financial results.
During the third quarter. The total unit costs was 24.5 dollars per barrel the significant decrease compared to the same period. In 2019. This is explained by a 28% reduction in costs, mainly purchases on imports as well as a 10% reduction in fixed costs there.
Lifting costs was 7.1 per barrel for the year, a decrease of 19% versus the same period of the previous year explained mainly by the renegotiation of TYRX decrease on a shift of activities on the exchange rate effect for the fourth quarter, we foresee an increasing costs. So.
They did with the reopening of wells, which will enable profitable production notwithstanding their vote, which to reiterate our commitment to achieving greater efficiencies in order to reach a more profitable and sustainable operation over time, I now give the floor to hynek alligator, who will share information on the groups.
Financial results.
Yes that'll.
EBITDA for the quarter was 5.3 trillion vessels reverting to the level reached in the first quarter. This year, despite lower print reference levels lower production on sales. Thanks to improved reallocation prices operating performance and Opex optimizations, which contributed towards an EBITDA margin of 43% compared.
Traveled to 2019 levels.
I'd like to highlight the turnaround in EBITDA generation across the upstream and downstream segments, which are once again showing positive results some even higher than those experienced in the first quarter and generating an EBITDA per barrel of 22.5 dollars the best year to date.
Cash indicators exhibited a major improvement during the quarter.
The business reach a positive free cash flow reversing the trend of the first semester cash.
Cash breakeven, which is the Brent price necessary to fulfill.
The commitments of the period, considering all inflows and outflows was 26.6 dollars per barrel.
Thanks to an increase in cash flow from operational activities, we prepaid short term obligations for the amount of 1.6 trillion pencils equivalents.
If current market conditions remain we anticipate a strengthened gross debt to EBITDA year end closing position versus our previous estimates.
Net income breakeven it was $38 per barrel the lowest year to date, demonstrating the increasing impact of interventions carried out to guarantee the group's resilience to the new market conditions.
Please let's move onto the next slide to discuss the income for the quarter net.
Net income for the third quarter of 2020 increase compared to the second quarter, mainly due to a 1.9 trillion passives increase in revenues due to higher sales basket price, which grew 23% more than the Brent reference supported by our commercial strategy that captured improvement in demand conditions for both crude oil.
On products second the positive effect associated to the increase in Seoul gas and products third improving operating costs and expenses. Thanks to the austerity plan and higher valuation of inventories, which were partially offset by higher expenses associated to the reactivation of operations and whilst we open.
Fourth the net financial expense showed an increase of 420 billion pesos, mainly due to a lower mark to market valuation of the securities portfolio linked to volatility as well as the premium paid in the make whole of your sales have bond, which allowed the extension of its maturity profile from 2021.
To 2027 fifth during this quarter, we did not recognize material nonrecurring events as those observed in the previous quarter. The most relevant being the business combination revenue of 1.2 trillion specialist associated with the acquisition of offshore gas assets in our heater feels fine.
Finally, the income tax provision for the third quarter was higher as a result of income increased during the period.
The tax rate for the quarter of 33.3% net income reached 855 billion passes the highest year to date.
Let's please continue to the next slide operating cash flow, including variations in working capital amounted to 3.5 trillion pencils capex outflows during the quarter reached 2.1 trillion passes underpinning a positive free cash flow for the car during the period the dividend outflow amounted to two.
2.9 trillion vessels of which 2.4 trillion were paid to the nation asked majority shareholder and the balance to non controlling shareholders of our transport subsidiaries and embed coursa during the fourth quarter, we expect to pay the remaining balance due of 3.2 trillion cash flows to the majority shareholder.
[music].
Net debt related disbursements for the quarter totaled 1.9 trillion pests, highlighting amount beast that prepayment and refinancing operation of Sanchez 2021 bond.
As well as the prepayment ethical bottles short term obligations our.
Our cash position closed at 12 trillion vessels, reflecting the group's ability to deliver the business plan, while maintaining cash management discipline. It's please continue to the next slide to review the execution of our investment plans.
Capex execution as of September totaled $1.8 billion with 71% directed towards growth opportunities mainly to the drilling campaigns carried out in the Permian he yet to reality and danita fields among others. The execution rate has been lower than expected due to.
Firstly measures implemented to decrease the spread of cobot, 19 cases, which required the postponement of activities, mainly laterally Allison can you sort of fields and the kind of Hana and bottom color may have refineries secondly, community blockades, resulting from the current situation in certain territories.
Thirdly operational factors that affected execution schedules and extended project maturity timelines.
On the other hand efficiencies have been achieved due to lower product costs investee, yet a hobby entering new fields among others, although execution challenges remain we expect a strong acceleration in terms of capex execution during the fourth quarter as compared to the previous two quarters, maintaining the growth trend.
Served in September.
The capex execution increase in the fourth quarter is underpinned by the reactivation of facilities investments, increasing workovers drilling and completion in the main fields and the operational continuity projects in all segments, leading the total execution for 2020 within a range of 2.5 and three.
Billion dollars.
I now give the floor to our president Mr. Felipe evaluation for his closing remarks.
Thank you Jaime.
During the third quarter, we continued to move forward in our commitment to technology environments, social and governance T E. As GE in our social front by the end of September Ecopetrol has allocated some 192 billion pesos to social and environmental investment compared to an investment of 60 billion pesos for the first nine.
Funds over the past year.
A milestone for the quarter, we joined the valuable 500, a global movement made up of companies committed with the inclusion of people with disabilities within their operations.
In terms of governance. The company will report again, so the Dow Jones sustainability index and to the carbon disclosure project and it formalized its adhering to the international Petroleum industry Environmental Conservation Association I pickup to promote environmental and social improvements within the performance of.
Oil and gas industry. Likewise, we continue to make progress in evaluating the adoption of the sustainability accounting standard class B and the tax force on climate related financial disclosure Tcfifty recommendations on the environmental front, we highlight achievements in for axis of our strategy.
First we increase our water reuse percentage from 62% in Threeq, 2019% to 64% and the end of the third quarter 2020.
Secondly, regarding our strategy and fugitive emissions around 20% of the total facilities of the production Vice presidency have been monitored identifying 752 leaks as of September we have already repaired and close 66% of them that equates to some 496.
And we have a plan for the definitive closure of the remaining leaks 30 leverage on technology progress is being made in the analysis of satellite images from the European Space Agency pro forming in order to identify the areas with the highest methane concentrations in our operations in Colombia, we expect.
This analysis to be concluded by December 2020.
Finally in August we signed the contract for the construction of the San Fernando Solar Park with a capacity of 59 megawatts, which will be the largest self generation solar park in Columbia, and whose construction schedule to begin in November 2020.
To meet our target of 300 megawatts of generation capacity from renewable sources by 2022, we have launched the competitive processes of a new wave of projects for a total of 112 megawatts in different regions in Colombia.
Let's move on to the next slide.
Ecopetrol has demonstrated its resilience adaptability and the commitment of its employees to an efficient operation that it's safe ethical and responsible.
For the year end, we remain committed to our main operational financial and technological environmental social and governance T. E. G metrics of our new 2020, 2022 business plan presented to you in the last quarter, which protects the main pillars of our corporate strategy guaranteeing the group sustained.
Ability and ratifying our commitment to climate change action energy transition on social development in the regions, where we operate.
Before moving on to the QNX station I invite you to download the TSG dashboard from our website. This is a new report designed for you.
Includes historical data on the main environmental social and governance indicators as well as the echo petros targets to move towards a sustainable future. Thank.
Thank you all again for joining us in this conference call.
Now I would like to open the call to the Q and a session.
Thank you we will now begin the question and answer session. If you have a question. Please press star and then one you're seeing your Touchtone phone if you wish to be removed from the queue. Please press the pound sign or hash key.
You are using a speaker phone you may need to pick up the handset first before pressing the numbers.
So that we can take us many colors as possible, we ask that you limit yourself to two questions.
Once again to ask a question. Please press star one on your Touchtone phone.
We have a question from the company and Barbara from UBI App.
Hi, Sean entry Hyman on that thanks for the presentation I have two questions from my end here or.
The first Uganda developments off doing collection in Colombia.
Well it isn't you start framework the country has now the guidelines you're quite advanced towards the accretion of those pile.
Pilot tests right up as you have or a missionary ecopetrol is interested in these new developments.
Turning to and like I said after the result of the SAP launched by the National hydrocarbon.
Alright agency selected contract next month, what would be the next steps a year and how should we think about the timeline upstream cultivation develop in Cologne there.
And I mean, when should we expect the first production.
Come from these developments and how the company since the size of this new market.
Oh lifting costs look it's a good figures that the company has reported the year to date.
They are much lower.
Dan what the company, we're running in 2019 around the way it's point $5 per barrel and my question. Here is it's it's this is Dick nobody don't normalize at a level going forward energy and if you should expect any effect from them on things delays in 2000.
2020.
Up to 2021 lifting costs or in the in the fourth quarter results.
If I may I have just one more here on the domestic demand and we saw during the presentation that the company expect expectation regarding improvements are.
In trio sales for the last choir, but this is to below the levels Prequalified right. Then up my question is regarding to the cost estimates in relation to the return of these demand up to the next year and how do you see the base case for 2021, so that's our.
Cashes question here. Thank you.
Transco 11, I'm going to take the first part on Unconventionals talk a little bit about demand and I will ask I'm dead for once laid it out to talk about lifting costs.
In terms of the unconventional it again the regulation.
Norms around how the development of the pilot projects will be conducted in.
Has been presented by government and we hope that by the end of November we will sign the contracts with the age.
You know it but all it has been a pre qualified already and we've stated publicly that we want to be the operators in this area. So what comes next we want or we need to conduct all the.
Work related to the environmental impact assessment studies that will inform the request for the the licenses that pilot projects. So that's the work that will start it by year end this year.
A big piece of work around the the licensing and the support for the license request in Ireland, we will it start all the preparation work to do the civil works construction works for the well pads.
Well the preparatory work for the contracting a rig and logistics and everything else and once we have the the licenses in place we will be able to start construction and then operations. So.
I wouldn't.
Good the specific date on when that activity will start specifically drilling and completing all the wells and fracking the wells because it's largely dependent on the on the licenses.
Themselves.
Absolutely the timeline for the development as you know we've.
Concentrated right now is the country on doing the what gets us below to the list you guys see any day now the pilot projects.
And once the pilot project given the result on a weekend as a country decide based on the science on the technical data on the potential impacts of the activity on how to mitigate those impacts. It we will have clarity on the timing, but one thing I would.
Thread, though is that if you look at the again, probably a proxy for these if you look at the.
Experience, we've had in the Permian Midland.
In Texas.
From November when we started production in that area of operations Weve.
Weve ramped up quickly to a close to 80000 barrels a day by the end of June so being short cycle.
Its activity that you can very quickly wholly on very quickly it bring into production and into the market it but again.
The final answer will depend on how the pilot projects yes.
Advance and the results of those in terms of a domestic demand. If you look at gasoline and diesel mainly <unk> and ballpark numbers pre.
Recall, we were at a 120000 barrels per day for each one of those so diesel and gasoline and jet was that a 30000 roughly yeah.
We are seeing right now in ballpark numbers are 110000 for diesel and gasoline and jet is still below and you can you can imagine that ER lights have resumed but the very limited in terms of the numbers of lights on please.
I will probably take a bit more time in terms of a recovery over demand.
But we do expect diesel and gasoline to come back to pre cobot.
The pandemic.
The numbers are levels.
Jeff I think we'll still have some uncertainty.
Very cool. Please go ahead with the.
What's going around lifting cost.
You got really good morning.
And thanks for your question.
[noise] with regard to leasing costs.
And you have to remind us during this.
Yes.
During the second quarter, we had to stop activities basically operate with a minimum vital.
That took us took out the lifting cost older $7 for Bob.
We have being reopening deals reopening wells the lifting cost has.
Slightly queasy when you see the third Q you look at the lifting cost of 7.2, and what we see by year end the Ace ER as lighting, we now will be a ended the year well in the ratio of 7.4 to $8 per barrel.
And I will be because of our age. She got we we opened all close production.
Because of our price.
And also because we have being able to cope with some operating yeah.
Goes down associated with social unrest.
Thank you.
Thank you guys.
Thank you. Our next question comes from go no one Tonight he from Morgan Stanley.
Hi, good afternoon, everyone. Thanks for taking my questions I have two questions.
Philipp if I may a follow up from the Spanish call. I believe you mentioned that the reserves could potentially decline between a 15% to 20% with information I'll be available to date just wanted to check you did just purely based on oil price movement.
Or is it also accounts when any other technical offtake that though the.
The company might have revised in the process of a start building up to the reserve report.
And my second question is about yes, and first thanks very much for providing more granularity on the gas results. It's it's very useful for us.
And you show they are gas margins are actually quite attractive, especially why oil prices remain depressed so with that in mind would it make sense, perhaps to increase investments in gas versus oil in the coming years. Thank you very much.
Bruno Thank for the question in terms of reserves.
I'll take the that question and I'm going to ask a JV buys our gas vice president to take the.
The second one but I'll provide some context, so hmm so the guidance that we see right now that 15% to 20%.
Decline in reserves.
It is is a it's a number that we are we see factoring everything in so it does have a view on prices. It does have a view of our level of activity our level of investments some of the difficulties that were mentioned in the call them. So.
Our ability to go back to a.
Higher levels of activity, so even though we've gone back to over 350 work fronts around the country.
It those those that guidance or it does reflect our view on.
Yeah, how the deals are performing how the yeah. The price will look on our level on our ability to to do TV and it also has a view on a on the next five years plus as as we see investment remember that we are.
Revise our capex down.
I'm close to 17 billion in the next three years is when we talked about that line in early March to to it later when they came back and said that we see ourselves investing between it's somewhere in between 11 and $13 billion in the next three years. So it's a combination of everything and he takes into account.
Yeah, the things that we will need to keep book, but also takes into account the additions that we make to the books and one of the.
The comments I was making this morning was the fact that it that we book reserves doesn't mean that they don't exist anymore. So we're just pushing them out into a different category I think that the challenge for.
For US is how do we get back quickly to the reserve replacement ratio of over 100%, they and that will depend largely on again, our ability to deploy capex our understanding of the field. The use of technology itself. So it's it's again a.
I think a.
Very very holistic view of things.
In terms of gas, which signal or in the next three years $780 million of investment to 870, it clearly a big focus in our strategy and I do believe there's opportunity for us to accelerate some of these.
Investments so a JV. If you can go ahead and give us a bit more detail and color or around our gas outlook. Please go ahead.
Sure.
No no and thank you very much for your question first I would like to emphasize that that has a strategic priority position within the Ecopetrols business plan being anything from fuel in the energy and economy transition as we have said on Philippe I, just mentioned that we will invest about $800 million in the 2020.
Plenty plenty to Europe in projects related to explore potential in the Colombian Puente Hills, kellyanne onshore and offshore and unconventional basins.
Cost to be consistent with our strategic intent, we are actively looking for opportunities to create optionality and deliver growth.
My teacher that I would like to highlight three sources of opportunity to increase our investment outlook first in the 14th we are in the process of my two de bottlenecking projects to maximize the production and delivered the full potential of that basin.
Second if we are successful in exploring the Fort Hills on Columbia place. They investment will significantly increase to develop those resources also we continue pursuing new exploration opportunities by mapping Neal prospects within our current portfolio.
And finally, I would say that we I'd comedian until we that's sustainable business and therefore, we are planning also to increase investments in social projects to provide access to that and speak to the most vulnerable communities in Colombia and from an environmental perspective, we are striving to increase yields has got in place.
Participation and to become disappointingly import electricity generation I hope I answered your question Brian.
That's very clear. Thank you both for for a detailed explanation.
Thank you once again for any questions. Please press star one.
We have a question from yet Tsang from HSBC.
Hi, My name is Lindsey what's.
That's a good question. Please I wonder why the midstream B wells, what's weak quarter over quarter I didn't I subtract that in the beginning but volumes came up right in the third quarter back on that and I think that's the type of discount that you are giving to the purchases. They also were already lifting.
So can you explain how I could see the different going forward.
Thank you.
Lily and good morning, and thanks for being in the call again appreciate your question I'm going to ask a million and Opus is from the midstream segment to take your your question around or the performance in the quarter Melena.
Please go ahead.
Thank you Kelly thing highly thank you for your question.
When you look at it second quarter numbers person third quarter numbers.
At the mid teen level, you basically have resources branding.
Have refined product pipelines.
Where volume was up and consequently revenues were up.
Basically the Gulf approximately 438 billion paid 590, you haven't 90 billion pets eat into other refined products pipeline. However.
However at the same time when you look.
And production.
Production and well I didn't understand what it's good.
The pipeline there isn't impacting the change in the way well use our route.
The big difference between second quarter and third quarter. If you remember the results from the refining segment is that when we look at the void that working.
You asked me about my God May have refinery. This was up by approximately 40000 barrels when you compare second quarter to pick one so when you look at the impact of this in the transportation segment as we are giving approximately 40000 barrels per day more employees into about likely refinance either volume.
That no longer continue through the rest of the Pos that takes them to go and that's what he's 40000 barrel I part of like total volume because they I believe it too fine, but they no longer go to a segment well since our third segment and they don't pay the exports either for it.
Or they no longer go to the upper deck, which will go in that segment and don't see export feed that for it. So basically what you see is well evacuated volumes are the same yeah.
Yeah, 40000 barrels that are no longer making it to play because they go to the refinery can they paid a total overall targets in the system that is lower when you compare second quarter to pick.
Going forward you should expect to see these behavior as we continue providing transportation services to Atlanta, and the barrels no longer make it look like because there was a slight everything.
And that they can't call.
Compensation increase in refined product pipeline.
Okay got it okay. Okay excellent. Thanks, so much.
Thank you we have a follow up question from don't normally Tonight, He from Morgan Stanley.
Hi, Thanks, I joined again for two more questions.
Just one on the oil price basket or it was very interesting to see that you return basically back to the same level of these calls before the crisis at around $5. A barrel should we expect these to remain stable at those levels or do you see an opportunity to capture even better realizations going forward on the back of your oil slate.
And then the second question is about the.
The Capex range for the fourth quarter I fully understand that you had the the budget for the year with the variance of $500 million, but it strikes me as a little bit odd that were already in November and their sales such a a big variance of $500 million. So are you more inclined to go beyond that.
On the bottom end of the range on the top end of the range for the Capex in the year. Thank you.
Frank Bruno and I'll give you some context, then I'll ask then.
There's been a little on the oil price rifle or basket of crudes, and and I know there too, but any comments on capex. So in terms of the the basket from our ore exports.
Please bear in mind that normally we sell our crude it two months in advance so.
Crude for November December have been leased already market and we are we are and I actually see it good behavior in that sense.
And again, we estimate the the year should finish in good shape and ER.
As you know we saw a very dramatic drop into Q, it very very difficult, but our crudes our computer.
As part of the base run where the base load where the rates on refineries in China and you saw that we've expanded it so more destinations to India and Korea. So yeah, I think that that's part of how we should view. The question, obviously, there's still uncertainty around the top line.
And which is the price for Brent in terms also topics a as I said I'm going to ask a little bit on highway to comment. So basically you can give us some more color around the that these kinds of prices basket that'd be great and then.
That's on high may be a little bit on the on the Capex.
Oh, yes, thank you Philippe and thank you for your question, Yes, certainly up because of the market conditions on the third quarter. What we're saying is that demand is recovering and as a demand recovered.
Our dog discounts were much lower compared to the second quarter, and but they're coming back to levels that we had in the first quarter and the average discounts that we saw last year and this is basically due to the the commercial strategy that we have been working on for quite some time because.
As Philippe mentioned, a much of our crude has been able to be placed in customers that use it in there the bayes rounds of the refineries and most of the crude is going into the new end users and the other thing is that we're very active in looking for the best markets to Blaise.
Our barrels and then we have been able to sign long term contracts with end users refineries and in in strategic markets like Asia or.
The U.S. our Gaba as.
This region.
Third part of the United States as well in Europe. So so what we're doing commercially that we basically.
Blazed our barrels whatever we can have the best realization for the barrels and ER and basically our dog.
This is combined to the focus that we've been given to our daughter got good for Xplores regarding quality. This quality has been very stable and we are we have a very competitive edge with our customers because of the low sulfur and the stability of the quality and also because we deliver barrels sometime.
So there is a lot of reliability from our side and that's why we've been recognized by the market and our customers as one of the best.
Crude heavy crudes from Latin America. So we foresee and also is that we already were down for the year. Our dog production program has already been placed in the market and actually next week, we're going into the starts flowing barrels in key markets.
For the beginning of the year. So we already we are seeing that because.
Because of all these conditions. The together. These calls are done very good and realization prices will be a bit optimize maximize overtime going forward. Thank you.
There are no with regards to Capex, so we feel very comfortable with.
The capex deployment in terms of the midstream and the refining segments as well as in exploration.
Although certainly comes out with a capex associated with the moment.
And specifically because we're gonna, although we are ramping up our activity and we feel.
That's the total has been kind of a good long I have to remind you that we still are facing the pandemic and that there is uncertainty in the degree of the pandemic during the month of November and December and how it is going to affect our operations is specifically in regions like the.
Yes, and then millennia the middle Magdalena. So so that's why we still retain the range hopefully in November we can have a better view on how the Capex will go.
All right fair enough. Thank you very much.
Hi, Thank you once again for any questions. Please press star one.
We have no further questions at this time now I will turn the call back to Mr. by young for final remarks.
Thank you and thanks again, everyone for being here today for participating in the review conference call for it.
Roll it we value your insights we buy your persons we value that you all know the company and ER and we will continue to strive to work to ensure that we can provide timely and transparent and relevant information that can help your analysis.
Yeah, Rick you shows signs of a recovery after a very very top very difficult second quarter, we're seeing different aspects of the oh, the operational side of the business. It's not our improving that are showing the resilience of the company and that are.
And transferred into the financial side of the business and the results that we've shared with you today.
Thanks again for your participation, we hope that you Stacy.
Okay, and hopefully we'll be able to trap again very.
Very soon in the near future have a great day.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.