Q4 2021 Ecopetrol SA Earnings Call
With 17 degrees API oil these.
These findings is close to existing infrastructure in the told him a block which will allow the industry to production from extensive tests in the first half of the year.
As a result of the 2021 round of the National Hydrocarbons Agency Ecopetrol obtained three technical evaluation areas in the Middle Magdalena Valley, and one exploration and production block in the general sort of Entellus region.
In addition core call obtain an exploration and production block in this in wholesale cutting into basin. The cumulative production of the exploratory assets in initial test extensive test on wells in post <unk> reached about one 5 million barrels of oil equivalent at the end of the year.
With an average floor of 4364 barrels per day out of which 65% of the production corresponded to crude oil and 35% to gas. According to the 2022 'twenty 'twenty four investment plan previously announced to the market this year with respect.
To carry out a program that includes 22 onshore wells and two offshore wells with an investment of approximately $391 million.
The drilling of the Gorgon two well, we hope to apply in the development of this discovery and enable other exploratory opportunities identified in the area.
It's more bond to the next slide please.
2021, as we pointed out was a challenging year in terms of production given a combination of factors that negatively affected us including operational restrictions in the cost of your field public order distressed during the second quarter of the year, the rainy season in Columbia, and the hurricane season in the Gulf of Mexico.
In line with our recovery expectations and due to the growing contribution of assets such as Permian production for the fourth quarter increased by 11000 barrels equivalent per day as compared to the third quarter with this production we closed the year of 679000 barrels equivalent per day we.
Highlights charging already resold in terms of research incorporation, which registered an additional 462 million barrels as compared to 2020 out of which more than 60% correspond to the company's performance and the remaining 40% is the product of a favorable price of scenario corrosion would.
The replacement ratio of 200%.
2022, we expect primary crude oil production to remain predominant, but we will preserve efforts towards secondary recovery expansion with water injection, mainly for heavy crude oil assets in tertiary recovery pilots unconventional as we will continue to increase their contribution to production.
And we expect these participations to be 5% out of the company's total production for this year, thanks to the activities in the Permian.
We highlight its research contribution as well, which alongside the Ecopetrol America accounts for 11%.
During 2022, we will focus on overcoming the challenges that may arise due to the logistics, an international supply difficulties and the public order situation on.
On the other hand, the average production of gas on LPG stood up a whole new era, and 50000 barrels of oil equivalent per day in 2021, which represents a growth of 7% from 2020, driven by the recovery of demand we expect a similar growth for this year in domestic demand.
Gas and LPG business delivered solid financial results with a combined EBITDA generation close to $807 million and a margin of 53% representing an increase close to 21% compared to the previous year.
<unk> for the Colombian market was strengthened with an additional potential of around 84. He got btu per day equivalent to 9% of the national demand in 2021, we highlight the exploratory success of the media wide totaled 12, well and the appraisal and development wells in the North Korea.
<unk> by whole coal the workovers into <unk> self consumption optimizations, and new offer from comparable dania.
Aligned with our key ESG pillar in 2021, Ecopetrol promoted the reduction of LPG prices by 30% in benefit of final users and managed to connect more than 6100, low income households to domestic natural gas networks to improve the life quality.
<unk> added more than 10000 connections since 2019.
Let's move on to the next slide please.
Regarding unconventional reservoirs on October 29, 2021 color is environmental impact study was piled launching that process of evaluation and approval of the environmental license for the execution of the project and on February 15th of this year. The same study was filed for the <unk> pilot.
Complain with the milestones of the plan.
I'm exhausted pit work exercise was carried out independently for approximately nine months for the formulation of each of the environmental impact studies, including monitoring of more than 200 environmental parameters.
Users of information by interdisciplinary teams of more than a homerun 50 people the public environmental hearing regarding the collapsed pilots took place. Despite the acts of vandalism that sought to prevent its realization.
The environmental hearing was held from a satellite point given the possibility to the community for more than seven hours to be heard virtually all through telephone calls we remain committed to an open dialogue addressing the concerns farm.
Of interest in the programs our range for this purpose.
Regarding our activities in the Permian Basin, 'twenty or 'twenty, one concluded with 82, new wells in production for a total of 149 wells on average of 19300 barrels of oil equivalent per day were produced and for 2022, an increase as expected reaching levels between.
32000, 34000 barrels of oil equivalent per day net for Ecopetrol prior to royalties.
Construction of the water recycling facility was concluded with the capacity to treat 65000 barrels per day on a storage capacity of 3 million barrels, allowing the joint venture to recycle unused around seven 7 million barrels and completion operations during the fourth quarter of the year.
This plan allows Permian to reuse a 100% of the water at South Curtis Ranch, continuing with the strengthening of our strategy with cutting edge knowledge. We increased to 25. The number of co patrol employees are signed our second lease and the associations operations <unk>.
I would like to highlight a few operational milestones our chief by the Permian during 2021, such as Optimisations in spud to rig release improvements in average drilling time on a record pumping time exceeding in some of these parameters our peers performances.
Let's move on to the next slide please.
During 2021 transported volume of refined products increased by 20% as compared to the previous year. Thanks to the recovery of local demand mainly in the Golan Sevastopol Corrado.
The transported volumes of crude oil in 2021 decreased 7% because of a lower production mainly in the <unk> areas. The fourth quarter presented a similar level to the previous year, highlighting higher volumes ebb up weighted in the southern corridor eight reversal cycles of the best in audio pipeline where carrier.
During the quarter to ensure they buy equation of the <unk> field. After the pipelines damage caused by third parties.
Floods emergencies.
The repair work the pipeline resumed operations on November 29.
Along with the reception of the <unk> Association fields from months not over in November <unk> implemented <unk> action plan to achieve their evacuation of such fields guarantee the safety of the processes and the integrity of the equipment that was Caronia station with an added value from the delusional.
System, which we used to guarantee mixtures from NAFTA or the quantities that it's possible to the barrancabermeja refinery.
The Colombia to call Ramius.
Additionally, the transported volume Endovascular on your system through Barrancabermeja refinery increased 10000 barrels of oil per day.
Dilution projects in our Pim Cucina enabled that use of LPG as a diluent for crude oil. These service allowed the use of a cheaper <unk> with a higher dilution power on lower logistic costs.
On December 7th the delivery of fuels at the FDA pillar came into operation.
Even the flow of heavy load on the road to the general by around 600 tank trucks per month on enabling an alternative supply option to ensure reliability in the supply to the metal department and to reduce Cotwo emissions.
During November and December Senate.
And those channels and only look to be Cincinnati, you received that carbon neutrality certification granted by the Colombian each digital docs technical standards, we come in the first companies in the Colombian oil and gas sector to receive this certification.
Our target for 2022 is for all the companies of the segment to achieve this certification.
Let's move on to the next slide please.
<unk> streams operational integrity prevailed achieving exceptional financial results.
In the same way the segment ensure the supply of fuels at a local level southeast structurally addressing the reactivation of the productive sector and reassuring the country's energy security.
The segment achieved an annual record EBITDA of $3 five trillion pesos and the highest annual EBITDA margin since 2016, reaching six 9% flavor by financial discipline and cost control.
During the fourth quarter of 2021, the segment achieved the highest integrated gross margin of refineries in the last three years standing at 12.5 dollars per barrel in barrancabermeja, we highlight the satisfactory execution of the shutdown plan at the petrochemical train and the crude and alkylation units.
The refinery.
At Cartagena refinery, we expect the start of the first shutdown cycle since the beginning of its operation, which will continue during 2022 altogether with the end currency and production of the interconnection project of the regional crude unit of the Cartagena refinery within your refinery planned for the.
Second quarter of this year, along with its corresponding drive drilling corporation of benefits in our Santa polypropylene production reach an annual all time record of around 500000 tons.
Thanks to the development of efficiency projects and its operation rate maximization, which started back in 2020.
Let's move to the next slide please.
So 2021, we have achieved efficiencies for $2 nine trillion pesos out of which $1 four trillion offset the pressure on opex caused by inflation and the reactivation of operations.
As reflected in the total unit cost of $39 $1 per barrel at the end of the year, which represents an increase of six 5% as compared to 2020 in normalized terms and contrasts with a growth of 10, 6% if efficiencies have not been implemented deficiency in these.
<unk> achieved in Capex four eight on around 33 billion pesos are aligned to the significant reduction of cheaped in drilling and completion costs, although cumulative lifting cost of 2021 registers, an increase when compared to the previous year. The strict cost control of the company allow us to reduce the unit values of cost per barrel.
Transported because of the lower consumption of materials and also the cost of refining due to the deployment of our strategies identified as part of the zero based budgeting methodology implemented by the end of 2020 I will open the floor to Jaime Caballero, who will walk you through the main financial results of the <unk>.
Tour group.
Alberto.
The historic financial results achieved in 2021 were leveraged by a favorable price environment on a highly effective commercial strategy.
That enabled the capture of distinctive differentials for crude and refined products.
Together with efficiency initiatives and our sound capital disciplined practice resulted in a significantly higher <unk> than our weighted cost of capital. It is worth highlighting the contribution to the results of the sustained and reliable production from our Permian operation the incremental financial return.
The energy transmission on road business.
And how do I handle refinery, which this year also obtained a record added degeneration and gross refining margin.
In 2021, Ecopetrol group's net income was 10 times higher than the one recorded in 2020 a.
Our record high result.
Closing at $16 seven trillion pesos.
The following aspects stand out first.
21, 46 trillion versus increase in EBITDA, when compared to 2020 in line with higher sales of products and gas lower labor costs, and other expenses, which mitigated the impact of cost increases derived from the economic regulation higher participation in fields, such as <unk> MSP and higher fee.
Fees in contracts among others secondly, a decrease of <unk> five trillion presses in the nonoperating result related to lower portfolio profitability given market conditions and the increase in interest expenses due to higher leverage levels third an increase in depreciation charges of <unk> five trillion versus.
<unk> associated with a higher level of capital investment and the increase in permits production fourth higher income tax provision due to improved results.
Fifth nonrecurring events of <unk> five trillion with 2021 being a year with a near zero effect for impairment net of taxes compared to an impairment expense in 2020 of 530 billion pesos.
And income obtaining that year from the effect of the business combination due to the additional stake in the Wahid asset.
In 2021, the effect of the annual asset impairment exercise.
Considered.
Better short and medium term price outlook for the upstream segment the decision to expense the remaining balance of investments associated with a lot of anchor.
Refinery modernization plan.
Which was partly offset by the kind of a half refineries operational and financial consolidation.
Thirdly, a lower volumetric outlook for that to macro port and the <unk> pipeline in the midstream segment.
Fourth the financial effect of the approval of the agreement between <unk> and different than idea generating.
Generating the recognition of an income of <unk> seven trillion vessels net of taxes and finally, the acquisition of <unk> that contributed <unk> three trillion vessels to the net income corresponding to ecopetrol as participation in the results for the four months. After its acquisition. Let's please go to the next slide to see the main aspects of the commercial.
Performance and its contribution to the group's results.
The commercial strategy was consolidated as a key lever of Ecopetrol as financial performance for the capture of benefits on France, such as asset backed trading diversification of export destinations adoption of da practices in our negotiations for different shipments and contractual flexibility.
The trading margin contributed $487 million across the group segments, mainly as a result of the naturalisation of benefits and heavy crude exports.
<unk> crude refinery throughput asphalt sales in energy efficiencies, especially in the upstream segment the higher sales of gas products were in line with the general recovery of economic activity, demonstrating the strengthening demand for refined products, which reach higher levels even preprint.
Patrick.
The crude oil gas and product baskets strengthened due in 2021 as a result of the increase in international prices and the different action fronts mentioned previously. Please go to the next slide to see the main financial results associated with ECS consolidation.
Since the consolidation of <unk> financial figures in September 2021, when the acquisition was completed a significant contribution has been observed from the energy transmission on road business to the group's yourselves with the following highlights first revenues of $4 one trillion vessels representing four five.
Percent of the total group's revenues and EBITDA of $2 seven trillion versus contributing six 3% of the group's total EBITDA third contribution to net income of 262 billion pesos.
Responding to Ecopetrol participation.
Unfortunately in addition to the above the segment reports a net income of 125 billion vessels.
Wayne by an exchange rate difference and the financial expenses associated with the contracted debt to fulfill the acquisition transaction.
<unk> added 61, seven trillion passes to the group's assets and $39 six trillion pesos to each liabilities.
The gross debt to EBITDA leverage ratio with which he has consolidated announced of four one times in line with a rating of investment grade and a stable outlook.
Additionally, in accordance with IRS, a total amount of $10 nine trillion vessels was recognized as the difference between the fair value and book value of Visa's net assets and liabilities. This difference was allocated between the consolidated assets and liabilities of this company. These material contributions to the results of the Ecopetrol group.
Show figures with a more prominent role of the energy chain and the income diversification for which the company striving. Let's please go to the next slide to see the main financial indicators.
Regarding the metrics of the traditional oil and gas business avid the per barrel close at $42 $4 supported by the higher crude oil and products faster sales price previously mentioned, while the net income breakeven closed at $34 per barrel as a result of various Asian prices for crude oil and products.
And higher refinery throughput due to the recovery of demand.
It is important to note that these metrics be specific to the hydrocarbon industry do not include the hydrogen Lisa.
Regarding key indicators, the EBITDA margin, excluding construction close at 76, 1%.
A result of inefficient and rigorous expense management process.
The 11 six.
<unk> E return on equity continued generating value to shareholders. Despite the impact on net income of the liability management of <unk> debt and the update of the deferred tax due to the modification of the income tax rate in Colombia regarding vehicle control group level indicators, which include Isa following sandy.
Out.
First and EBITDA margin of 45, 7%, mainly explained by better realization prices of crude oil and products.
It should be noted that the four months consolidation of Isa contributed one percentage point to the margin for which a greater impact is expected once the full year as reflected secondly.
Return on average capital employed returned to double digit levels closing at 13, 6%.
Mainly due to higher operating income, which was partially offset by higher taxes and the increase in capital employed.
Third the midstream segment continued to be a major contributor to the group's a bit higher.
Highlighting as well and in turn the growing participation of Isa Who's more stable EBITDA allows the group to be better positioned to face volatility in the hydrocarbon business.
Lastly, the gross debt to EBITDA ratio closed at two three times.
Below the target level of two five times.
Maintaining therefore, our standalone investment grade criteria. This even incorporating hunger percent of ECS that we acquired that for the purchase and only four months of its EBITDA.
Eliminating the effect of <unk> acquisition, the Ecopetrol group's gross debt to EBITDA would have closed the year at one three times, let's move on to the next slide please.
The execution of investments during 2021.
Wanted to $8 billion, the highest level in the last six years.
Of this amount $3 2 billion corresponded to organic investment from Ecopetrol and its subsidiaries of the hydrocarbon business.
$1 1 billion to Asia, and the remaining $3 $7 billion to inorganic investment for the acquisition of the ladder.
Regarding organic Capex during 2021, a level close to the $3 $5 billion target announced in the third quarter results was executed.
This was impacted by efficiencies and maturation and execution phases of development and production projects restrictions related to the public order situation and the impact of COVID-19 on global supply chains.
Longer terms and administrative procedures, which mainly impacted activities in paramount.
Some blockade in a reality sooner lafitte and Danny fields within the Companys plans to increase capital intensity.
The focus on projects that drive production and reserves growth.
Inorganic optionality in the transmission and roads business.
Let's move on to the next slide please.
At the end of 2021, Ecopetrol recorded a consolidated cash position of $17 five trillion pesos.
Which 2022 will start with a higher cash position than the one ambition.
In the 2022 2024 plan among the most important yearly movements are.
Firstly strong operating cash flow generation of $22 five trillion vessels of which <unk> contributed with one for treating patients and that excludes the pending balance seven eight trillion pesos associated with the account receivable from the fuel price stabilization fund setback for expansion.
Secondly, the outflow of investment resources for organic activities by $13 three treatment vessels and their appreciation of visa for $14 two trillion vessels.
Third the financing inflow for the acquisition of the controlling interest in <unk>.
And for that service.
Lastly, incorporations in cash from the Isa consolidation regarding the setbacks bonds ecopetrol group's expectations contemplate the liquidation and collection.
Three five Chilean pesos in balance for the third quarter of 2021 in line with what it is foreseen in the National General budget. Additionally, the company expects to collect the estimated bonds of the fourth quarter of 2021 before the end of the year. The final cash balance considers cash and cash equivalents.
$14 six trillion vessels on a short term investment portfolio of $2 nine trillion vessels.
I'll now pass the floor to Philippe for his closing remarks.
Thank you Jaime in 2021, we have very important results in our key ESG agenda in the environmental front. We are pleased to announce a reduction of greenhouse gas emissions of more than 293000 tons of Sidoti <unk> equivalent exceeding the target of 125%.
Some of the initiatives that contributed to this reduction include energy efficiency.
Patiency projects, which have allowed us to optimize our energy mix reduce fugitive emissions reduced venting and flaring as well as projects of self generation and our solar farms.
In order to meet our long term goals, we made progress in the natural climate solutions funds by establishing partnerships with the nature Conservancy Wildlife Conservation Society, who industrial net order South pole and the connection how what program sponsored by visa. These programs offer the potential to capture more than 1 million tons of <unk>.
Tier two equivalent per year, which will enable carbon offset starting in 2030.
In addition, we increased our self generation capacity with renewables 212, five megawatts, which now accounts for 8% of the company's energy mix in terms of water management, we registered our reuse rate of 74% of the water required to operate with which we continue progressing towards our goal of one.
Neutrality.
We invested 469 billion pesos from $120 million and social projects that seek to promote local development to improve the quality of the communities consolidating high level of trust in the areas of influence boosting lock Autonomies education and access to public services.
These projects supported around 1100 rural families and 463 small and medium sized enterprises as well as the construction and improvement of 60 kilometers of roads and contributing to strengthening educational quality for more than a 190000 students in terms of governance, we made progress.
In transparency and disclosure of information under the <unk> standards, becoming the first Colombian company to do so also according to Dow Jones Index increased from 66 to 68. In addition, we joined the 30% club and initiative that fosters greater participation.
Women and board of directors and senior management positions in the business sector. Furthermore, Ecopetrol achieved a certification antibodies silver shield with a 98% score with this we now have five companies in the Ecopetrol group with a favorable processes for gender equality under this certification.
While these achievements joined those accomplished in the recent years.
We have adopted OECD recommendations regarding the non participation of public officials and the board of directors and definition and application of independence and technical knowledge criteria for the members of the board.
The independence of more than 50% of the members of the board.
The sign of a clear succession policy for the members of the board as well as for the CEO of the company.
Strengthening of the approval system for investing in projects based on technical criteria, including control segregation of duties and our decision making structure that integrates different governing bodies, let's go to the next slide.
Ecopetrol is a key player in development of Colombia, the regions, where we operate and our stakeholders <unk> contribution to the Colombian economy in 2021, with some 26 trillion pesos, including dividends taxes royalties to the nation dividends paid to minority shareholders, social and environmental investments.
The employees' remuneration on local procurement, we also contribute to guaranteed <unk>.
Security, a leading colombians decarbonization roadmap.
Our efforts to generate value to more than 254000 direct shareholders.
More than 18 million Colombians that are affiliated to the pension funds.
More than 18000 employees and over 3000 local suppliers, we continue working to be energy that transforms, let's now move to the final slide.
The record results achieved in 2021 reflect the competitiveness of Ecopetrol and its evolution in the recent years in 2022, we will continue to focus on profitable growth of our core businesses. The protection of the environment in which we operate the relationship with the communities, we will capture the upsides in favor of.
Crude oil prices, while we continue to move forward and consolidating the energy transmission and road concession businesses within the equitable group. Once again. Thank you for your time and interest in participating today with this I now open the floor for Q&A session.
Thank you.
This time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press the pound key.
Once again for any questions. Please press star and then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
We have a question from David <unk> from UBS. Please go ahead.
Hi, everyone can you guys hear me.
Yes, we can we can hear you.
Okay.
Awesome, great. Thanks for taking my questions and congrats on the on the regions.
My first question regarding the nickname you just released the <unk>.
2022.
Until 2024 plan.
You stated that you expect globus resumes.
63, <unk> 2022, and so far this year has been quite a bit there, possibly remaining at high levels for longer periods. So our first question would be how flexible is discipline in terms of either accelerating or where we are.
Indicating advancing them and he won't be the company generating more cash than initially expected.
What will be the main goals in terms of capital allocation maybe.
Maybe two P M.
Returning capital to shareholders.
Broader investments.
Who are the keys.
Hum.
My second question.
Uh huh.
What's your view in terms of the breed buying.
The companys portfolio into the energy transition.
We have seen the company benefit in the short term from high levels of brand. So would the company be really or maybe would.
It'd be a possibility to delayed planting in other segments in the short term and at a high for brokers in the entry segment seeking.
Seeking to benefit the move from these high grade English for doing so.
Do you need my my two questions. Thank you.
David Thanks, a lot and thanks for being here today I'm going to take the questions now if.
If anybody in the team and wants to ask something else probably Jaime.
Feel free to do so.
The first thing is as you rightly point out our plan is robust.
$63 per barrel.
And we have some sensitivities in terms of what it means to have.
One or two or whatever how many dollars on top of that that forecast it was a budgeted.
Bayou that we've used but the first thing I want to see that we.
We want to remain very disciplined and focused in terms of how we deploy the capital I think that one of the strengths of Ecopetrol over the years, you know with the the last two crises that we've had.
In this last five to six years.
Our ability to remain very disciplined on in that space capital discipline is fundamental.
No.
That's point number one we want abandoned capital discipline.
We won't go do a lot of things that may appear to be appealing because there's more cash in terms of investments, having said that we and remember that we are already increasing almost 50% our capex from last year to this year.
Take into account the inorganic.
He was presenting earlier, which would take you two 8 billion plus of Capex. So discipline, we're already increasing our being more aggressive in terms of the number of wells the number of projects and a number of fields that we wanted to put into a.
Tie back or put into production in the life. So I think that's really keeping the focus on being very very disciplined.
And we are we do we will we will have optionality.
When it comes to.
Higher revenues and a more cash so what can we do with that can we prepay debt.
Hello can reduce home inorganically.
Can we actually accelerate not necessarily two additional things, but is there any opportunity to accelerate projects that could be accelerated.
Remember that there is.
And worldwide contests.
On the.
Date or supply chain and logistics difficulties that we need to cope with as well.
So I think all of the things that you've mentioned.
Possible, we could repay debt, we could return to shareholders there could be some additional inorganic opportunities.
Just want to stress once again, they need to be very disciplined with our capital.
Terms of diversifying the portfolio and I wanted to get a framework of the $20 40 strategy that we presented to you guys to the market a.
A couple of weeks back.
We have a frame that I think it's very sort of twofold.
It's very comprehensive and it provides for the growth of the core business within the context of energy transition. So that's what we intend to do so I don't see us jumping around and just stalling things.
To try to do some others I think it's fundamental that we continue to be.
Proactive and.
Basically leading region in terms of energy transition.
That's one thing that you'll be hearing more from us in the coming months and so.
I don't know, if <unk> or digital or anybody if there's anything else you guys want.
<unk>.
Hopefully.
We are not in here because I think you've covered.
The key points you know our philosophy. He stated in the strategy that we rolled out a few weeks ago on our focus now is on executing that.
Thanks, Diana and thanks, David and thanks for your interest and thanks for being here today.
Thank you.
Next question comes from Anna <unk> from Bank of America.
Hi, Good morning, Thank you very much for the call and for the presentation.
Two questions. This morning. The first one is just to go over a little bit more in detail. The 'twenty 'twenty. Two Capex plan do you have that great slide I think it's slide 20 here.
You've come from 2018 to 2021 to.
No a little bit more where it's going to be spent in 2022. You will know you will you are increasing it as you mentioned to the 4.8 to $5 eight.
A little bit more information there and then the second question has to do with Ecopetrol.
<unk> use of electricity generation.
No you've been involved with some solar plants and just wondering.
How much more can you do on the renewable side or internally using your own gas production.
On the just on the electricity side, a little bit more information. Thank you.
Thank you Anne and good to hear you and I'm going to ask.
And then to take the first part of your question around the Capex details.
I am going to start return to.
Electricity generation so it.
Today, roughly roughly ballpark numbers.
8% of our capacity is mainly solar did you think about renewables. So we have.
Two solar farms, and we're buying the grid as well.
And where we will ready.
Nouns and.
Six more solar projects coming through some of them will be PPA, namely power purchase agreements.
But eventually we will have equity owned solar projects as well so that's in the works we should.
You should be hearing more about that so we're very very happy with what we've seen with the performance of our solar both in terms of reduction of emissions and cost savings. So both things actually worked very well.
If you remember the context of strategy, we mentioned that by 2040, and we want to be between 25% and 40% of our capacity.
Yeah.
Roughly being from renewals.
So the point, Dan and I'm speaking about here can we find a way to further accelerate that and I think the answer is yes.
So that's directionally, what we've said we want to do but eventually we want to accelerate that renewables also includes things like wind. So we're looking at wind opportunities.
Caribbean and Columbia.
Very prolific in terms of when speed. So we are looking at that and we've been measuring the wind for some time.
There's opportunities in that space, we're looking at geothermal energy as well so.
We should be doing our first pilot soon Mr. <unk>.
Using the energy in the subsurface to generate and I'll close by saying gas.
Last year, roughly 60% to 62% of the self generation was born with gas, so again, and we expand that probably yes, and we'd be more.
Efficient can we close cycles, so definitely there's opportunities in all of that all of those areas.
And I'll definitely you can if you can take.
And to some of the details or through some of the details sorry around capex that would be great.
Yes for repair things.
And good morning, and as you mentioned our guidance for Capex in 2022 will be.
And the range of four 8% to $5 8 billion.
In oil and gas will be spending at anything between three 7% to $4 7 billion and Isa in days that business. It will be about $1 1 billion.
If you look at the upstream itself.
Range will be between three four to $3 8 billion.
And if you talk about exploration itself, it's going to be close to 400 medium than production anything in the range of three to $3 4 billion and in the investments that we're gonna between and abroad in the upstream.
Close to $800 million to $850 million per year.
When you look at the midstream will be in the range of $350 million to $400 million annually.
And refining a $450 million to $500 million in 2022, and finally in terms of our ESG agenda, we'll be spending around $350 million.
So that that's going to be.
And the figures that we're going to be managing 2022.
Okay.
Thank you.
Our next question comes from Liliana young from HSBC.
Yeah.
Hi.
Good morning, everyone. Thank you for the opportunity.
I actually have a generic question.
Well, that's your feet I'm, sorry, if you already addressed.
Your remarks, but I would like to have a color on implications of rational clinical sneak into the supply chain, Michael petrol, beating Colombia will be for your opinion.
How are your priority health challenges.
For the bathroom into kind of Q E V O D.
Okay.
Another question is on the mix.
If you can just give us an update on the later than the upcoming lately.
Crude in Florida, a few pipeline asset.
Thank you.
Hello, Lily good to hear from you in terms of the first one.
I'm going to ask Pedro to provide more detail.
Around implications.
Not only in terms of supply chain really but in terms of commercialization and trading and the likes so Pedro can give us a view on I'll give you my first impression on that.
And on the midstream I am going to ask Milena to help us with the email. So in terms of the conflict. The first thing is that we were.
We are deeply saddened but.
But what's what's going on right now in Ukraine, a lot of people suffering a lot of people suffering.
And we hope that there is a resolution very very soon.
Very soon so.
Yeah.
Before the conflict, we were seeing already some disruptions in supply chain. So there is some pressure.
On the commodities and some of the things that we use in our projects you know aluminum and things like our feel of things like copper. So there have been some some pressures are 10% to 15% roughly and some of those areas.
We said that we saw.
Almost half of them.
Trillium pestles opioid.
Stationery impacts last year, but there were more than compensated.
By the $3 trillion, we actually.
<unk> savings, so I think theres some theres some impacts there will be some impact, but again it will depend largely on duration intensity and disruption of some of those supply.
Supply chains that were seeing but.
We are not changing priorities.
I think the other part of your question.
We have a plan.
It's aggressive.
It has an important increase in terms of capex deployment.
We need to be able to execute on time within six to ensure that the time to market of the molecules and hydrocarbons.
<unk> achieved so digitally if you want to jump in and help us with some of the trading.
Aspects of this and then eventually if you Wanna I'm thinking out loud because you want to chime in anything else that I've missed when that supply chain and then we go to millenia data.
Thank you Philippe and thank you Lou and good morning, and thanks for your question, Yeah absolute Filippo said.
What we're seeing in the remains.
We made is that it.
What remains in place.
And some time we are seeing.
Is that weird net exporters of crude so we're seeing a positive effect on the crude side on the exports that we do.
We're seeing it right now because of the level of prices that we're seeing in the in the market also on the diesel side, we had a net net exporters and so we're seeing a positive impact as well and also on the fuel oil because we received that theres going to be some disruption.
Russia is such an important player on the fuel side. So we're seeing also a positive impact.
For our sales and also on the asphalt side, we've seen a positive effect because weird.
Increasing exports of hospital.
And Russia is a very.
A huge player worldwide now the imports side, we're seeing a negative effect on the boards of the crude that we're making for our refinery system.
Net importers of gasoline so we're seeing a net effect on that because the gasoline art also prices going up and also on the naphtha deal window, we use off of our upstream business.
We're seeing because.
Russia is.
It's a very importantly on the on the NAFTA side globally and also the last the impact negative impact that we're seeing is the increase in shipping costs that we're seeing and we're going to be seen if again these.
Event remains in place.
Time, but at the end of the day, we'd net out the positives and the negatives were seeing that is going to be a net positive effect on our business. So that's basically with the analysis of the work we've been doing so far and obviously we're monitoring this on a day to day basis. Thank you for your question.
I don't have any other.
<unk> I think you covered everything.
Thanks, Alberto Molina, you can help us with the midstream side.
Yes, Thank you Philip and thank you for your question.
Before I go into the details maybe a bit of context will help in terms of understanding the impact.
When you look at the midstream EBITDA, approximately 20% to 25%.
Refined product pipeline and obviously it moves around depending on the FX as refined product pipelines have tariffs that are set in place.
In terms of refined product pipeline.
Carriers that are basically used today most of them were sat around 2003, except for one segment that was done in 2011 theoretically these tariffs get reset every five years similar to what you'd see in a crude pipeline epic. This has not taken place so.
We are doing.
Or for a revision and so this isn't something that is extraordinary.
Cargo the periodical changes.
This year, the Craig which is the regulatory entity for energy and that has published their regulatory agenda, which set or the publication or comments of what the new methodology or refined product pipelines would be in the first semester of this year and this is <unk>.
Published for comment generally Theres, a series of meetings and back and forth with the regulator.
And final publication of what the methodology would be is due in the second half of this year.
Assuming that takes place according to the pipeline, we would be handing in.
Sarah filed which as they say the documents that given all the inputs for the calculation of tariffs at the beginning of next year.
And would probably have no refined product pipeline Paris.
It's fully operational probably by the end of next year, they usually whereby the.
They report we send them it takes them about <unk>.
Six to 12 months.
And with that so that.
Process Thats, taking place in terms of refined product pipeline system.
Much it's business as usual.
And obviously, we will know what the changes may or may not.
B one the initial methodologies published a comment at the beginning of this year and once that takes place we will be reporting.
And intense.
Refined it sorry in terms of crude pipeline, so oil and what we have is what you've seen every 48 days or weeks at the pad size.
Updated in June of 2023 and that is in the regular question revisions every four years one of the things that is new is that the ministry of mines and energy with regulator has in their regulatory agenda stated that they may be making some changes to the methodology, which is there.
We'll be publishing in the last quarter of the year.
And so that is something that we would see end of this year and it would probably incorporate.
Certain things from consultancy project that they have carried out in terms of providing is there any updates that you'd be made for the methodology, that's more or less what the timeline looks like any changes if they were to happen.
That would only apply once the tariff reset in June of 2023.
Thanks Lily.
Yeah.
Thank you.
Our next question comes from Christian Audi from Santander.
Thank you Hello, Felipe Hi, mineral belt and nickel patrol team congratulations.
On the very impressive results.
Across the board I had the three subjects select twin screw a boat to please the first one going back to capital location.
In terms of Capex.
Are you able to.
We anticipate capex projects or even if you wanted to do that you can't really be done in the short term.
It would have to be more of a 2023 onwards dynamic in other words it couldn't really increased capex in 2022, just because.
When you imagine some of these projects are long dated.
And then in terms of dividends within capital allocation.
You paid given your.
Very close as a result the next.
Ordinary dividend now.
Was just curious if you were able to do that.
On a quarterly basis going forward or no it's something that tends to happen only at the end of the year.
And then in terms of the other use of capital in organic growth.
My understanding was that you were particularly interested in opportunities with.
Uh huh.
But I was just wondering given again the prices are so high oil prices are so high if the all of a sudden opens.
Instead of opportunities for you to pursue either organic growth also in the oil and gas sector and not just related to either then.
And then the second topic was cost very quickly I was just wondering if you could comment on your outlook for lifting the Luton and transportation costs, given whether you were able to achieve in the fourth quarter and then finally Philippe on corporate governance.
You have them.
A significant amount of work on corporate governance, improving and strengthening your bylaws or board.
But at the same time, we're dealing with a very dynamic.
Dynamic fast changing pre election environment that generates a lot of noise right candidate things things that they wish they could do but whether they can be done at a separate story. So I was wondering.
Given your very attractive its solid micro story.
What can you tell investors from a macro point of view.
Of Ho Hum.
Protected Echo petroleum has given it.
Strong bylaws and board set up thank you.
Christian Thanks, well theres.
Lots of different lenses and your questions. So.
What I'd like to do is I'll, just give you a context in Alaska.
<unk> to talk a little bit more about capital allocation and we anticipate projects.
Is it more of a thing for 2023 potentially yes, but this year because we will remain very disciplined which was something that I was I was answering one of our previous questions. The data policy I'm going to ask Jaime to provide a bit more detail, but the news we had a.
And I think you use a good word that we pass on to the team impressive.
We had impressive results and I think in that sense being at the top end of the year dividend.
Range within policy is good.
As always is always good.
Inorganic opportunities, we always have that you know as as we've done in Brazil that you've seen over the years with things like after a month or some of the exploration blocks as we did with the Permian.
No one in the Permian is going to be going on a net basis north of 30000 barrels this year for us or 60000 barrels for the JV.
50, we're going to go to 60.
And providing $250 million, so EBITDA and an EBITDA margin of more than 80%. So there will be opportunities that will need to be assessed but you rightly point out.
Having higher prices, having more cash inflows will give us more flexibility in terms of either.
Or in terms of.
Accelerating some things on the margin I would say and then I'll come back to corporate governance. So Alberto if you can help us and then Jaime and then.
Is it back to me and I'll talk about corporate governance.
Thanks, Philippe good morning, Christian with regards to capital allocation I would like to start saying that.
We already have a challenging year in 2022, we are going to be spending a lot more work done in 2021.
Our guidance for Capex in this year 2022, it's going to be between $4 858 billion.
And when you look at 2023.
Given the state of maturity of our projects, we're going to be spending more we're going to be spending more particularly in the upstream. So so definitely we are going to keep us in.
Consistent on our capital basically in 2022, ensuring that we continue to mature and our projects. So we can deploy the capex that we expect to spend in 2023.
Thank you Alberto.
Sorry and on.
Yeah.
Hi Christian.
Thanks for your questions and <unk>.
Dividends.
This actually tagged along with what our bedroom Alberto mentioned, because I think the way that we're thinking about it.
Managing and allocating potential excess excess cash I would characterize it as I thought as a as a period, where we're the first priority.
He is actually the first pillar of the 2014 strategy and Thats growth right. So our first mandate. If you will is to make sure that growth opportunities are funded.
As you've heard from Alberto the organic component of of the plan is pretty firm.
We are increasing the intensity of that plan.
If you think about it from an annual basis.
So I would say I'm quoting Philippe here about any changes to that organic plan are going to be at the margin I think where we could have.
Where we could have some opportunities could be in the inorganic front.
Clearly and I'm going to actually start with the transmission business.
The hopper and the pipeline of opportunities that he saw E working on maturing and the nature of that market is one that there could be substantial in organic opportunities in the near term.
So thats something that a consideration we wanna, we'd want a key <unk> growing.
And the excess.
Cash that we have.
Could be could give us flexibility in that conversation.
Secondly, there could be opportunity inorganic opportunities in in the hydrocarbon business as well.
And obviously, we're not going to we're not going to put up those.
Those opportunities in a broad because of their nature, but we continually are looking at them and we're going to be looking at opportunities are consistent with our strategy.
That.
Seems like an odd.
Our presence.
In fast growing areas.
Places, where we're seeing the opportunity for short cycle hydrocarbons dull sort of opportunities are things that we're looking at and we will continue to look at so I think that's the first priority second priority is around competitive returns and in order to deliver the sort of returns that we're delivering on you saw 13.
Six royalty.
We closed last year in order to deliver that we need to have that capital discipline, but we also need to make sure that our leverage ratios are very robust and whilst we are comfortable with that worries you.
We would clearly have a preference to reduce it and to the extent that dose.
Access revenues allow us too so I'd say that that's the second priority.
Once those two elements are covered growth is secure and very healthy and debt levels are secured and there are some space, where we can improve on that.
Could go into a conversation around.
Additional.
Distributions to shareholders.
To your question do I see kind of quality distributions by Ecopetrol No I don't I don't see that I don't see that and it's something I'm going to explain why I don't see it I don't see it because.
We don't believe that the price environment that we're seeing right now east <unk>.
Systemic we don't believe that it's necessarily sustainable and therefore, we need to be very careful about the sort of commitments that we make on that regard now right.
Is there going to be a conversation about this in the second part of the year.
This environment prevails.
Yes, I would say that's something that that will be reasonable to expect I hope this helps Christian and with this back to Philippe.
Thank you Jaime so in terms of corporate governance, I think there's a.
Lots of things that we want to or we need to think about Christian the first one.
Ecopetrol has been doing a lot of work around corporate governance for many many years. So this is not something that we're just.
Thinking about now is something that is taking us. Many years, you know I've been already six years in the company.
And I've seen.
Very very positive changes you know and I think so.
Having the ability of testing us and setting us against international standards and good practices is always good. So I think we continue to make progress in that sense.
Throughout the different <unk> different years, we continued to strengthen our corporate governance. So I think the first one the first thing is that.
The elections are still out there you know there's a.
<unk>.
Congressional elections that are very important as well in March and then.
One where eventually two rounds with presidential election. So the first thing we need to wait to see.
Who is going to be elected both in Congress on this.
Second and I think Colombia has demonstrated.
One of the.
Notwithstanding democracies in the region.
Ability to ensure that through checks and balances as these would be called in.
There's always.
Our opportunity to ensure that the.
Overall decision, making is a respected investments are respected and the like so from that point of view I'm talking as a Colombian.
Not worried.
Worried about.
The outcome of what's what's really going to come.
Whats happening so and in terms of Ecopetrol specifically.
Im probably going to go into detail, but I think it's relevant to provide you a bit of the conflicts Christian so.
Like independence on the on the Board members you know.
The losses that we need to have 50%.
Independent Board members, we have eight out of 983% or whatever the percentages.
The tenure of the board members.
We're proposing that it's increased from two years to four years.
You look at international standards most boards.
People would tell you.
Board members normally are there.
678 years, no one actually in Ecopetrol, we've had.
Board members on average 253 years, so we want to ensure that there is.
More continuity, especially in the context of the strategy you know us as we.
Laid out strategy for 20 years.
It's having that line of sight.
Other thing is important.
The competencies that are required from board members that was also.
<unk> approved last year. So it is very specific to be a board member what you need to to be able to comply with in terms of terms. If you take that level one level down.
Last year mid year in the summer, we actually approved the succession.
The program or plan for a frame for the CEO of the company.
In the case of emergency or a planned succession. So I think our commitment has been doing a lot of work over the years to ensure that there's stability we have a long term strategy.
The results.
Impressive results from using your words.
It demonstrates that we are resilient, we can very quickly adapt but we can also lead on things like energy transition.
And things that are positioning I think ecopetrol.
In a different league in terms of how we see things and if any of you go down in the organization that I was referring to this in the prior call.
Manish.
Last year I personally presented to the board.
The succession plans for the 30 top executives in the company.
So it's something that is it's been thought through it we're very organized we're very disciplined.
I think from that point of view.
The company is well positioned.
I think your question was something around.
From a macro point, however, ecopetrol protected.
And I think.
And being also a multi region multi business.
That floats in New York.
That is through the pension funds in Colombia somehow touches it.
18 million Colombians to the pension funds. So so theres lots of I think.
Good good.
Elements in that sense to.
To ensure that I think corporate governance, which is already very good and strong.
We'll we'll get even even stronger so I hope that helps Christian.
Let me know because I know, it's a topic of interest. So we let me know if theres anything else you want to touch on.
Thank you. Our next question comes from Andres Cardona from Citi.
Everyone I have two quick questions. The first one is if you can comment about the downstream margins.
EBITDA.
Margins that we see in the fourth quarter are they are sustainable.
Or is there any new recurring event, maybe I don't know boosted by the chemical business. The second question. If you can comment about the quality of these current outlook in the context of the situation.
Situation that we are seeing in Russia, and Ukraine and the last one if you can help me to double check a couple of of that US is EBITDA margin for the gas segment in the fourth quarter and what is the dilution factor also as of the fourth quarter. Thank you.
Yeah.
So thanks, Andres and good to hear you as well here in this call. So the firstly Alberto why don't you start with the dilution factor.
First one.
Then we can go to the gas EBITDA I think thats the other thing on Jamie.
If you're around piece if you can take that one and then the EBITA margin in divestiture. If you want to take that up we are we have Walter. Please go ahead Alberto I'll pass it onto your first and then Jamie.
Thanks Oliver.
With regards to the to the EBITDA margin for gas.
And in fact, the let me start with dilution factor.
Fourth quarter specifically.
We saw an increase in the dilution factor given there that.
We face the realities higher Cogs.
Cost of the purchase of the deployment so the <unk>.
<unk> factor was up.
$85 per barrel for a total of 427 during the year 2021.
We expect to keep it under control.
During 2020 to close to the $4 per barrel range. So that's kind of where we are at in terms of dilution.
I am going to give the word to Jamie but in EBITDA margin for the gas business.
What I can tell us is that we continue maintaining margins.
Above.
Percent.
We did that back in 2020 and again in 2021.
And recognizing that we had an increase of about 20% in terms of.
EBITDA growth in 2021, so that.
Kind of where we arent Jamie you want to complement.
Sure I'll mental thank you very much thanks, Andrew for your question, Yes, our gas business delivered strong results in 2021 growing more than 20% compared with 20 planning in terms of EBITDA.
This business generated more than $800 million EBITDA.
With a margin of 53% and it includes of course the results in the fourth quarter, that's way above 55%.
And it has been in have remained stable for the last three years. So in conclusion gas has proven to be a resilient unprofitable, we've left which lead us to allocate more than one $8 billion to that in our 'twenty plan into 2024 plan. Thank you.
Alberto.
In terms of the downstream segment.
What I can tell you is that we.
We believe that we can manage.
The operational availability of our two refineries.
As we have in the plan and also we see that we can we complete.
Expansion projects in the Cartagena refinery, we are going to be able to maintain a <unk>.
Level of EBITDA margin similar to what we had in 2021.
Yeah.
Yeah.
Thank you.
We'll go to the next question it comes from.
Bruno Montanari from Morgan Stanley .
Good afternoon, Thanks for taking my questions I have.
A couple of follow ups only from the prior call on this one.
Starting with corporate Bourbon and indeed, the company has made very strong progress from the years just had a specific question about the proposals you are making to change the bylaws now specifically the one increasing the tenure of board members from two to four years, if that is approved and like it's going to be approved.
Does it change the existing.
Tenor of the of their current board members or does it apply only for the next.
People getting into the team.
And the second question is about the stabilization fund.
I understand that the figures that were given.
Our expectations to collect the third and fourth quarter.
Values, but the <unk>.
Question is this.
Demand is improving now after the worst of the pandemic oil is close to 110, so doesn't mean that.
The receivables and the fund will actually grow throughout the year and could be even higher than the seven eight trillion pesos that we saw at year end. Thank you very much.
Thanks, Bruno and with respect to Capex.
Hybridization fun I'm going to ask <unk> to provide a bit more color.
The answers are yes.
<unk> will eventually increase.
Good news government has always paid us within 12 months.
On the.
The receivables increase also the revenues increase so it's a we need to look at the overall context on the fact that we ended up last year with $17 five trillion pesos and actually not the.
The budget law for Colombia, the National budget law.
Lowe's for extraordinary dividends to be used proceeds to pay for outstanding stabilization funds.
<unk>, so there's a lot of elements in that and I'm going to ask.
Yeah, Hi, Nick to provide more detail on in terms of the year of the proposal on the tenure of the board.
Specifically it will apply.
As soon as it's Oh.
Proved or not by the General Assembly.
And.
On the answers we will apply as soon as they.
The AGM approves the changes.
We're proposing on the bylaws.
Thank you Philippe.
Hello, Bruno good to hear you with with regard to this allocation fund as anticipated.
Most likely higher prices imply a higher balance in that.
In the fund I say, most likely because remember that in the formula considers three or four angles to it right. There is an angle around and the behavior of the international prices for diesel and gasoline there is an angle.
Around.
Weather and.
Adjustments are made at a domestic level in terms of prices at the pump and effects that balance too. There is a third angle very important angle, which is around the FX effect.
Can be actually quite substantial in terms of moving that.
The balance of the fund in any direction, so clearly too to take out the Crystal ball. If you will in and go out there and say exactly what's going to be the.
The evolution of the balances is difficult we can we can create scenarios and directionally directionally.
Is that current market conditions.
And prevail.
The dog.
The fund is going to grow at a pace, that's going to be higher and the one that we saw say in the first half of last year. It is going to grow more like at the pace of what we saw probably around <unk> of last year.
<unk> in which the funnel is growing.
Yes.
As Olivier mentioned, we are in very close discussions with the government around this is not a surprise.
Something that actually the government.
<unk> by itself monitors regularly and I think there's two or three.
And things that give us a lot of confidence that that this should not be a source of concern.
The first one is that.
National General budget has made specific provisions around.
How these funds can be manage what are the sources to a if you will and honor the obligations of the fund and it has.
Very clear very Berry.
Unwavering commitment if you will towards honoring those obligations, so that and I just had a at a legal level. So so that gives us a lot of.
Confidence the second thing that gives us our confidence that when we sit down with that with that with the government. There is flexibility within their budget as well with regards to how they're managing execution this year and the likes and thirdly it.
It has to be said.
Implied, but I'm going to I'm going to be specific about it clearly.
The way that we make a dividend distributions to our shareholders has two needs.
Needs to be compared with with how that balance is evolving.
And that balance needs to be.
Tolerable level for us to feel comfortable with the sort of dividend distributions that we are recommending social all in all and <unk>.
I want to reinforce the message that there is.
A clear commitment around keeping dose spanning sense within a 12 months period, there are the mechanisms to honor them.
And that's.
That's why we are planning on the basis on which we're Brian .
I think that covers it do we have any remaining questions.
Yeah.
Yeah.
Sorry about that let me check if he does so.
Mr. Wilson.
Okay.
Yes, Im sorry, Im just too hot.
Go ahead, yes, I had just a quick follow up because it is very interesting. So when you mentioned that the extraordinary dividends could be used to.
To repay a portion of the fund does that mean.
For instance, instead of.
Announcing the 9% <unk>.
That those funds will be used to prolong or department of defense is that the way to understand it.
No Bruno.
Let me clarify let me clarify that so.
We need to be clear that the conversation around the fun easy conversation with one shareholder.
All shareholders. So this is a conversation about how the majority shareholder wants to receive its dividends and they have the flexibility to choose how they want to receive their dividends.
It can be done via cash it can be done.
While we call here locally tasks, which are some pharma.
Financial certificates, if you will.
Each time, we paint a broad economy locally one mechanism one mechanism could be.
To make some form of exchange between the dividends and the farm and that mechanism is something that the.
The government can use.
But it's going to be their decision.
To offer that.
Okay.
Thank you.
Our next question comes from Andrew Mccarthy from Credit Corp. Please go ahead.
Good day, everyone. Many thanks, Philippe I may Albertville.
Call them.
Rest of the team for Nicole on the presentation.
I think most of my questions.
But maybe just two follow up questions.
The first one was just on the production for the upstream business School.
22, you know.
Looking at the level you reach in the fourth quarter.
The 695. This is the target for 2020 to 700 to 705.
Just considering obviously the very favorable.
Macro backdrop with the.
Brian I was just wondering if there's any if you're seeing any scope maybe.
Increasing.
By production levels.
Julien during this year and any upside you might be singled out for them and then the other follow up was just on the inorganic opportunities you mentioned that you were interested in transmission.
Business in the past.
Perhaps things some opportunities on that front.
Just wondering if you could provide any other color there in terms of what sort of geography, you're thinking about.
You've given any thought as to how that would occur.
Would it be something that would occur level.
The level, they would think that transaction or given all of the.
Let's say.
Surplus cash you have on the Echo patrol level would you be looking to do the transactions.
Level.
It would be my follow up so many thanks.
Thanks, Andrew and good to hear from you.
I'm going to start with the panel one and then I'll hand, it over to Oded.
To provide a bit more detail on production and what we're seeing.
We ended up <unk> 95, and going into this year. So in terms of the inorganic opportunities and one of the things that we've mentioned specifically is that we're looking at transmission opportunities in the U S.
And it's a it's a market that we know I mean from the oil and gas.
The lengths if you will we've been there for some time as nickel plate rolling our recent entry into into the Permian as well.
But having that fruit.
Already in the U S. I think it provides us the opportunity to vehicles. What's next I mean, if you look at the content.
Which where we're focused in as a group the U S.
Yes.
Think it's a natural place to look at them. There's opportunities you know provided there is no future deals coming out of Congress in terms of sort of infrastructure investments across the U S. We'll see where that goes but definitely there's opportunity in the U S.
And I think there is a need to ensure that.
Reliability of transmission at least providing energy to people is something that that can happen. So there will be opportunities there and we will be looking at that.
And if that's the case and we decided that's the right thing to do it will be done through email.
Remembering and highway has mentioned this in the past.
We are leveraging ratios in Asia and as a group are a bit different you know is.
Having the cash flows that it has in the line of sight to businesses.
The opportunity of having a gross debt to EBITDA ratio thats higher than ours. So eventually that if it happens it will be done by either but we will continue to look at some other geographies and the other thing that I want to mention Andrew is that it.
If you think about the next 10 years this decade.
Easter has commitments of roughly seven and a half million dollars of investment.
Has.
Probably going to be in the $12 billion to $13 billion range, but.
And we have a pipeline of $36 billion already identified.
So there is an opportunity not to talk about specifically the transmission.
And therefore, if we can go to.
It doesn't mean, we won't look at other things Andrew just don't get me wrong, but we will continue in our high net worth stressing this earlier in one of his responses. So a better if you can talk about production that'd be great.
Yes.
Hi, Andrew.
With regards to production.
And recognize first that we need to stabilize production levels and basically we're working in different areas. The first one is getting gas demand back at pre pandemic levels. That's number one second on our subsidiaries we have some products.
Hiccups in both <unk> and <unk>.
Ecopetrol America, and the Gulf of Mexico, So we need to recover the production levels that we were experiencing even before 2021 and certainly in particular in Colombia in our mature fields is how we recover production because we after we have experience with.
Sure teams because of several.
Things for example.
<unk> alone Rasp third party events.
Also because of electrical.
Operational hiccups.
Thirdly, because of higher water content in our mature fields and the case of TTM in Anacostia dock.
That means that we have to put all our efforts in satellite secondly, recognizing that we also have to replace production about 100000 barrels per year because of the decline in production in our main fields that remember that our declining factories about 14 two <unk>.
17%, so we need to recover that and thirdly definitely we have investment plans.
<unk> with incremental production.
In order to say that we are.
We keep our production guidance in the order of 700 to 705000.
Barrels oil equivalent per day.
Do we have any more questions.
Okay.
Thank you we do have a follow up question from Liliana young from HSBC.
Please go ahead.
Mr. Yang Your line is open. Please go ahead.
Yeah.
Perhaps you're on mute here.
Lily.
Okay.
MS. Yang can you confirm your line is not muted.
Yeah.
Yeah.
Okay.
I'm, sorry, I think she may be muted on her aunt <unk>.
Okay.
But.
Is the opportunity.
Sorry go ahead.
We don't have other questions in queue.
Okay, Yeah, I was going to offer a linear or anybody else theres always the opportunity to follow up with the teams.
And we'll be glad to.
Get whatever information is required so I just wanted to thank everyone for being here today for their interest in Nicobar drug for.
The feedback that you provide for the opportunity that through your questions. You gave us on understanding what are some of the things that we are constant.
Constantly you need to think about and have a deeper understanding and especially the ability to.
Relay and communicate those those aspects to yourselves.
Thank you. Thank you. Thank you for being here. We appreciate it historic results and we're very proud of the team of the 18000 people in Colombia and in the different geographies, where we operate.
In the U S and Brazil, Chile, Peru, and in some other countries. So thanks again for being here today, Please stay safe and hopefully we'll be able to talk to you soon have a great day.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.