Q4 2022 Ecopetrol SA Earnings Call
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The discovery of Gorgon too and the tuba, one has allowed us to confirm Colombia has potential to be self sufficient and gas production, which is considered the feel for energy transition. Thus the country has enough volume to fulfill its future needs. We have also started to implement the cobot road groups low carbon hydrogen strategic <unk>.
Plan with a pilot that made it possible to create the first green hydrogen molecule in Cartagena refinery, which lays the foundation for starting projects on an industrial scale from 2025.
Our third milestone was the incorporation of 280 megawatts from Nonconventional renewable energy sources, which is the largest self generator of renewable energy in the country.
Generate value through GE ESG, we've reduced 416672 tons of greenhouse gas emissions, thanks to our new projects up energy efficiency and reduction of flavoring and fugitive emissions, we proudly announced that this year, we have surpassed 15, 9% of the <unk>.
Tablets target of 262761 tons.
Besides Senate and its subsidiaries along with Essentials and 11 <unk> subsidiaries for certified as carbon neutral by E contact thanks to the rigorous compliance of the stated plan.
Forward to the aim of being water neutral in 2045 for that reason, we will launch the project along with Accenture and Amazon Web services for the integral management of water, which will allow us the stimulation and optimization of the processes of collection use and disposal of this liquid in three assets of the Ecopetrol Group Carter.
In etch knowledge with focus on design and technological and innovative solutions to drive the energy transition video initiatives as energy Tech and the Caribbean innovation and technological center, a place where hydrogen is the protagonist competitive returns in.
In 2022, Ecopetrol reached the nation's largest taxes royalties and dividends transfers of more than 42 trillion pesos, which will enhance colombians, well being and quality of life in this way with achievements and significant actions. According to our four pillar 240 strategy we are moving.
Forward steadily to continue building a country of all to all.
Good morning, and welcome to <unk> fourth quarter and year end 2022 results conference call.
I would like to start by highlighting the efforts and commitment of more than 18000 direct employees and some 130000 indirect employees.
Thanks to all of them, we can deliver the best results ever in the history of the equity group in the year 2022, we generated revenues of almost 160 trillion pesos in EBITDA of $75 two trillion pesos and a net income of $33 four trillion pesos doubling net income obtain.
The year 2021. These results are underpinned amongst other things by some of the following factors a favorable environment of international prices. We increased production of hydrocarbons are traditional business are trading strategy outstanding results in the electricity transmission toll roads and <unk>.
Communication business line and the growth in domestic demand for our fuels, which meant higher sales products, our operational financial and <unk> results were aligned with the goals set for the year exceeding them in some cases.
This reflects our commitment to our competitiveness and sustainability of all of our businesses.
I would like to take the opportunity to highlight some of the achievements.
In 2022, we had no fatalities in our operations and achieved the lowest total recordable injury frequency rate E. R. I S.
For truth.
In the company's history, reflecting a reliable and safe operation environment.
For all of our employees, we had an average production for the year of over 709000 barrels of oil equivalent per day exceeding the goals set for 2022.
<unk> energy supply capacity reached 208 megawatts in 2022, we had higher social and environmental investments, which reached 615 billion persons a 31% increase when compared to year 2021.
And some of the other indicators so I'd like to highlight our gross debt to EBITDA ratio closing at one five times.
Our operating cash flow generation of some 36 trillion pesos on the execution of our capex of more than $5 4 billion in year 2022, all of this reflects the group's capital discipline and financial strength.
Let's move on to the next slide after overcoming two prices and less than a decade, we managed to deliver historic results.
Accomplishing transformational milestones such as the drilling of the first offshore well operated by our Colombian company <unk>.
In 2017, and then the three offshore discoveries in the Colombian Caribbean achieved since then.
We entered the Permian basin very successful alliance with Occidental in 2019.
And during the years of 2020 and 2021 to.
Through our program called <unk>, we contributed more than 139 billion pesos to colombians during the pandemic during COVID-19.
Provided commercial relief to customers and suppliers in.
In 2021, we acquired 51, 4% of visa.
We've had overall this year's deploy.
Deployed several initiatives in terms of strengthening our operations safety PSG.
And our financial discipline.
All of these have allowed us to trace a path of responsible transformation to move.
From being the traditional integrated oil and gas company.
To now a diversified energy group today Ecopetrol operates in three solid business lines.
Aimed at guaranteeing the generation of value for all of our stakeholders.
The first one hydrocarbons.
I would like to highlight the increasing the volumes of our production transportation and refining operations and I'd like to share with you that in the year end 2020 to reach a production exit rate exceeding pre pandemic levels. Our refining segment reached more than 400000 barrels of consolidated throughput basically due to the.
<unk> of Cartagena refinery and very good operational capabilities in both refineries and the transportation of hydrocarbons and fuels that increased by more than 6% when compared with 2021 for the low emission businesses I'd like to highlight that.
The Gorgon too in a two hour new discoveries that confirmed the presence of gas in deep and ultra deep waters in the Colombian Caribbean.
Production of our first green hydrogen molecule in the country as part of our strategic plan.
Low carbon hydrogen and the operational startup of our third solar Park thesis in the department of Wheeler, which a capacity of 26 megawatts. Finally for our third line of business in electricity transmission toll roads in telecommunications I would like to highlight the 32% growth.
<unk> net income.
Year on year as well as the progress in the construction of 32 energy projects that represent more than 4600 additional kilometers of high voltage power transmission lines.
Let's now move on to the next slide.
Ecopetrol acknowledges its position as a key player in the national economy and its development.
That is why our strategic planning always considers responsibility and commitment with the regions in which we operate.
Last year 2022.
Ecopetrol transferred to the nation over 42 trillion pesos in dividends royalties and taxes.
Likewise, the Companys contribution is also reflected in things like.
Today more than 2100 families.
In the farming and rural communities.
Third 28000 students.
764000 people.
With access to drinking water and sanitation, all benefit with our social environmental investments.
The value promise to our more than 255000 minority shareholders and some 18 million colombians will contribute to the pension funds.
Our contribution to the country's balance of trade, which experts that represent around 30% of total Colombian exports.
The continuous improvement in the quality of fuels consumed everyday by Colombians, the promotion of employment through the increase in the hiring of diverse talent.
With more than 20000 inclusive jobs that include amongst others.
More than 560 people with disabilities, 7% of our human talent identified as part of ethnic minorities on.
5% identified as victims of the armed conflict agenda.
The generation of some 130000 indirect jobs.
So our contractors in year 2022.
It is through these fronts on efforts that we continue to work to be the energy that transform net.
Let's move on to the next slide.
When we think about decarbonization of our goals in all of our operations remain intact remain in place, where we're focusing on achieving a 25% reduction on scope, one and two emissions by 2030 and a net zero emissions by 2050.
While also reducing total emissions that would be scope, one two and three by 50% by year 2015 in.
In 2022, we made decisive progress in our de Carbonization strategy and I want to highlight a few things energy efficiency and through some of these initiatives. We have allowed to avoid the emissions of a 138000 tons of <unk> equivalent.
Last year, we closed around 1700 methane leaks exceeding the goals that we have set for ourselves.
We have avoided emissions in the startup of our <unk> and San Fernando solar farms of more than 32000 tons of equivalent.
We've offset in crude oil and products.
But we've given to our clients some 149000 tons of steel to equivalent.
In the same year, we purchased over 118000 tonnes of carbon credits through our <unk>.
Trading cash.
Our first fill gas flaring report to the global gas flaring reduction partnerships. According to the commitments made to the World Bank zero routine sharing initiatives.
And we also did something it wasn't an unprecedented research campaign, where we started the Caribbean mangroves, the middle Magdalena wetlands and the Orinoco Forest that was initiated to understand amongst others. The state of conservation ecological catastrophe, such as carbon inventories under carbon free.
Jason capacities.
Analysis of vegetation covered through multi temporal images.
Factors of loss and gain of ecosystems functionality and relationships with our communities.
In addition to the Ecopetrol has different business is certified as carbon neutral ESR as Cynthia our subsidiary in the Pet Chem business.
Our hydrocarbon transportation businesses that would be senator or Samsung or they say well the early ambition scenario.
As well as.
Asia and its subsidiaries in transmission Roes and telecommunications.
Via bulk reflects the company's commitment and alignment with our country's de carbonization goals on the Paris agreement.
Also want to highlight that in year 2022, we had several milestones in terms of defining bowls and the management of water resources in our operations.
Last year, we achieved a reuse of 78% of the water required cooperate which represents an increase of 6% when compared to year 2021, I also want to take this opportunity to reflect on the fact that ecopetrol is committed to be water neutral by 2045 and <unk>.
Means that we will replenish at least a 100% of the water consumed in our operations achieving.
Keeping a positive impact in each of the water basins, where we operate.
To this end by 2045, we expect to eliminate these charges to surface water bodies.
Reduce freshwater collection by 66% or two thirds and offset the remaining 34% in.
In light with this commitment is that a few days ago, we announced that Ecopetrol is the first mining energy company in Latin America to verify each water footprint.
This time for the work with <unk>.
Certification of the calculation and reporting of the water footprint in four of our major facilities in the company.
The Cartagena and Barrancabermeja refineries.
Production field surplus Cedar in fantasy Santander.
And Cascadia in meta integrated water management that ecopetrol six to contribute to the accretable economically sound and environmentally sustainable provision of water resources in an aligned matter with our strategy 2040 energy that transforms on our PSG and climate change.
Agenda.
I will now pass the floor to Jamie buys we will share with us the results and milestones of the low emission solution businesses line.
In April in tiny tiny tool, we've reached significant milestones in our portfolio of no emissions energy solutions.
Both our EBITDA of the natural gas and LPG businesses.
<unk> 22 was 1020 $7 million, an increase of 27% compared to previous year. We also delivered a robust netback.
Point $2 barrel equivalent borrowings increasing it by other 14% vessels 2021 a copaxone group is committed to maintaining a strong investment in low carbon solutions.
Pending it by 140% year over year in renewable energy sources Ecopetrol continued to make significant progress incorporating more power capacity, reaching 208 megawatts of renewables in the energy supply mix by Dan Okta.
20% benefiting from the competitive labor life cost of energy and the low emissions intensity.
Up mid and downstream segments have reported accumulated cost savings of more than 22000 million pesos and cotwo equivalent emissions reduction of about 32000 tonnes.
In 2022, we have high expectations about the hydrogen that game and we close out on a high note since we launched our strategic plan in last March our achievements have positioned ecopetrol as a leader for low carbon hydrogen development in Colombia and throughout the region.
By the means of delivering the first proof of concept in the country.
So fully per deals green hydrogen and youll see it in an operational finance as expected, although these days which is final.
Allowing us to capture the lessons learned.
<unk> incorporated Knowhow on the development of two Mega scale projects that will be operational by the end of 2025. Each of these projects is expected to have.
60 megawatts electrolysis capacity powered by Green energy sources.
<unk> 9000 tons of hydrogen per year.
Let's proceed to the next of late.
Sustainable mobility Ecopetrol continues to make strategic progress.
Ill program cop emerge umbrella.
One of which is the pond to promote use of natural gas in heavy duty trucks known as Candaele that has evolved in conjunction with the oil companies in Colombia, We moved forward with the pilot in Bogota, where public transportation Basel forward by Green hydrogen.
<unk> are expected to be on the road in plenty 'twenty.
The ecopetrol raise awareness on the importance of innovation ecosystems and made progress with the infrastructure to produce hydrogen and refueled light vehicles that is under construction in the Caribbean innovation and Technology Center. These mobility Park.
Comes from Anna Gladman between Toyota on Ecopetrol also I would like to highlight the 249 electric hybrid vehicles.
Vehicles that are now part of the Ecopetrol split, making up 25% of our automotive Park.
While 2022, a capital continue to focus on increasing reliability of natural gas sources. The micro LNG project in <unk> completed six months of being online and has allowed us to test an efficient system that creates optionality.
Kip, one hand with Berstein service availability.
Okay level on easily replicable solution. It also provided on autonomy of seven base to win I've enjoyed a district and work 20, <unk> seven duty contingency periods experienced during the last year plus.
Allowing more than 45000 families to receive an interrupted natural gas. In addition, we were able to consolidate in 2022 and ecosystem that labour, Russia, the reduction of greenhouse gases emissions and underpins new businesses for Ecopetrol. These.
<unk> was a strength with strategic alliances.
Platforms.
The international gas Union ideal the hydrogen council the international renewable Energy Agency and award annually Kozol, among others as part of our ongoing effort to improve community wellbeing, we expanded the social gas program connecting more than third.
<unk> telephone Hermes in the country's rural communities, so that natural gas network.
More than 2 million final users families of <unk> communities with our utility company in vehicles on why there was a cycle of high prices. The cooperative group reduced the LPG price by 30% benefiting more than 3 million families Inc.
Colombia, I will now give the floor to Alberto Consuegra, who will go through the main operational milestones. Thank you Jami bye.
By year end 2022, the net proven reserves one of the Ecopetrol group amounted to 2000 11 million barrels of oil equivalent with a reserve replacement ratio of 104% and an average reserve life equivalent to $8 four years over the past five years.
<unk> group has maintained an average reserve replacement of 130% even under challenging market conditions by implementing continual E&P innovations in its processes. The capex executed in 2022 contributed to provide inorganic reserves totaling 200.
15 million barrels of oil equivalent through the execution of successful drilling and workover campaigns in fields, such as it will be Alice <unk> under SEC methodology, the Brent price used to value reserves was $97 $9 per barrel it should be pointed out that by the <unk>.
2021, we were able to capture the volumes lost due to the price decreases of 2019 and 2020 and consequently by the end of 'twenty. Two the contribution of this factor was reduced to 19% versus 39% in 'twenty. When however, it is important to highlight the growth in <unk>.
<unk> volumes, which have allowed for a positive trend of recovery on growth improved reserves over the last six years Ecopetrol continues progressing towards becoming a more gas focused company by 2030 in line with our energy transition strategy approximately 60% of the exploration portfolio.
These gas targeted and we continue to focus our efforts to materialize reserve additions from the development of the offshore and onshore Colombian Caribbean as well as in the BLM on debasing discoveries Ecopetrol delivered in 2022, the highest historical gas volume since 2010.
92% of the nations gas is produced in the trend pillar Monday, and Nevertheless will replace 67% of the production volume.
Moreover, the balance of resources on improvement reserves of the Ecopetrol group reflect the potential headway to develop this volumes into proven reserves and therefore it is imperative to continue allocating capital to mature new projects and include their production in order to strengthen organic growth on the country's energy sub.
Let's move on to the next slide. Please during 2022, we drilled a total of 24 exploratory well in line with the plan by year end, we totaled seven exploratory successes in basins that hold interesting prospects for ecopetrol, which allowed progressing more than <unk> 50.
The percent of the drill prospected volumes to this corporate resources. Furthermore, six wells are currently under evaluation I wanted to highlight the success of the EBIT Mark are two sidetrack appraisal well wholly operated by our subsidiary <unk>, which confirmed the discovery of crude from the biomarker one well drilled.
In 2021 located in the Tolima Department by year end, we incorporated <unk> new blocks in our exploratory portfolio with strategic partners in Brazil, six offshore blocks in the southern region of the Santos basin in Colombia for deepwater blocks in the Caribbean and our subsidiary.
<unk> was able to acquire a 50% stake in two blocks in the lower Magdalena Valley and single serve coffee into basin in partnership with <unk> energy S. Operator, or 'twenty to 'twenty three we expect to drill 25 exploratory wells out of which 12, we'll be focused on gas mainland <unk>.
The Caribbean offshore.
The northern onshore, Colombia, let's move on to the next slide please.
<unk> mentioned in 2022 production continued its growth path, reaching 709500 barrels of oil equivalent per day exceeding the targets set for the year. The December result, which reached 734900 barrels of oil equivalent per day was the highest.
Since February 2020, I would like to highlight the performance of Kenya ft with an increase of 15000 barrels of oil per day. Thanks to the entry into operation of the first fluid treatment train as well as add that additional production from the Permian subsidiary.
Was mentioning the increase in execution capacity during 2020 to.
36% increase in development wells drilled at <unk>.
Compared to 2021 with another or to use of 28 weeks on a 25% increase in workover activities. In 2023 production will maintain its growth trend with target volumes of 720000 to 725000 barrels of oil equivalent per day, mainly live.
Such by incremental production campaigns in the Permian subsidiary <unk> <unk>, let's continue to the next slide we are pleased to report positive operational and financial results from our Permian Basin with average production in 2022, reaching 37.
8000 barrels of oil equivalent per day net for Ecopetrol before royalties and 96% increase over 2021 with an EBITDA margin of 87% the acquisition of the new areas in the Delaware Basin added 48 million barrels of oil equivalent to the 2020.
Two reserve balance drilling operations in the region began in December in line with our <unk> strategy, we highlight the progress in the carbonization of our Permian operations.
Zero routine flaring and the use of monitoring systems for the early detection of methane Fuji deeper emissions for 2023 we foresee average production of between 60% to 65000 barrels of oil equivalent per day with about 120 to 130, new wells to be.
Drill let's continue with the next slide please transported volumes increased by more than 63000 barrels per day in 2022, mainly due to increased crude production higher local demand for refined products and additional barrels from third parties and we emphasize that for the second consecutive quarter, we achieved record.
Equation indicators in our multipurpose pipelines due to the in town intensifies use of the puzzles Golan system, which allowed us to have a greater availability of products in the barrancabermeja refinery. The midstream segment of the Ecopetrol group received a carbon neutral certification from the Colombian institutes authentic.
Our standards on certification Econ Tech, we're very proud to be the only midstream segment in the world to be carbon neutral likewise at year end Senate acquired the country use small hydropower plant SHP, which has an annual generation capacity of 25, four gigawatt hour on Easter.
<unk> group's first hydro power generation assets. This will avoid approximately 63000 tons of <unk> over the next 15 years, thus contributing towards reducing the company's carbon footprint, let's go to the next slide please.
In our downstream segment, we achieved perception of our financial and operational results with increased operational availability a yearly record reach in terms of gross refining margin of $21 per barrel and a segment EBITDA of Colombian nine five trillion pesos, we highlight the historical fine.
Actual results of the Cartagena refinery with EBITDA for Chilean pesos, and a net profit of $2 two trillion versus the <unk> 2022, the combined refinery throughput reached 344900 barrels per day exceeding <unk> 2021.
<unk> bye.
Forecasts on 800 barrels per day due to the greater availability of domestic crudes in the execution of a scheduled major maintenance activities in 2022, we accomplished multiple milestones of which we highlighted.
The successful startup of the crude unit interconnection project in the Cartagena refinery IPCC, increasing its throughput capacity by 50000 barrels per day.
For a total new capacity of 200000 barrels per day, the refineries operational availability was about 94% with the successful execution of 12 preventive major maintenance activities contributing towards safeguarding the operational reliability of our assets in Q4, the first scheduled in May.
Your maintenance update U 100 crude oil unit was performed after seven years of continuous operation development Garden refinery was recognized as the best refinery in Latin America by the World Refinery in association stronger refinery operations due to technological.
<unk> that ensure energy submarines and fuel quality under the highest world standards. Since July 2022, the Ecopetrol group has delivered gasoline with a sulfur content below 50 parts per million and as of January one 2023 is still with the sulfur content of 50 <unk>.
Per million they are successfully execution of the green hydrogen production pilot test at the Cartagena refinery finally, I would like to highlight a cynthia's new recycled plastic resins plants that will be online by for Q2 2023 with an annual capacity of 12000 tons and a carbon footprint that is.
50% lower than that of comparable mechanical recycling plans it will positively impact more than 3000, recyclers and generate over 8000 jobs, let's move on to the next slide. Please in 2022, the Ecopetrol group design, a comprehensive strategy focused on mitigating the effects that internet.
From a markets have had on the cost structure of our operations and investments we achieved efficiencies of approximately $3 five trillion pesos of which one 2 million impacted opex and as such was one of the main drivers to contain inflationary forces. These initiatives included strategies focusing on optimizing lifting cost.
As well as the crude dilution factor and also that improve the operational and technical performance, while the investment projects among others. In fact, we saw a 13% inflationary impact on total cost total unit costs for the fourth quarter has a year on year increase of $7 per barrel largely due to the <unk>.
Of higher prices on purchases and imports of crude and products the lifting cost exceeded the year on year increase of 11% mainly explained by an increase in operations and made the fact of inflationary pressure on the cost structure on the other hand, the downstream cash cost remained constant.
<unk> 2021 levels due to a greater throughput volume to the refineries, which offset the inflationary effect finally, the increases in cost per barrel transported were offset by a low or unit cost due to the greater volume transported as well as the effect of a higher exchange rate when converting costs from peso.
$2 I would now like to turn the floor to Jaime Caballero, who will update you on the transmission and toll road segment and recount the mainframe natural results of their co patrol group. Thanks, I'll bet Ethan.
<unk> announced its results of early 'twenty adequate we wanted to heightened excellent performance.
During 2010.
Which resulted in the historically high dividend for the benefit of all shareholders.
Great potential joint value creation going forward, capturing eight working groups, we're set up to identify construction synergies between <unk> ankle.
As a result of the electrical infrastructure synergies.
Initiatives estimated potential bank.
Alright.
Group.
$360 million have been identified that collaboration process Jim companies. Other lines of work elimination solutions have been identified such as green hydrogen gas to power and energy.
Among others.
Pacific time associated with synergies program will be incorporated.
Strategic up till 'twenty affordable price.
Let's go to the next slide.
In 2022, Ecopetrol group presented exceptional performance in financial indicators.
Courted by solid operating earnings while its business lines.
With the marketing strategy allowed us to take advantage of it in March.
And the results at the consolidated level.
The margin of seven 2% and return on capital employed of 18, 8% of.
Gross debt to EBITDA.
Indicator, one five times and our net debt to EBITDA of one.
One three times.
These indicators improved versus the previous year.
Due to hirschmann contribution of all the group companies, especially the Permian and the product Makena Recline, which also broke records and stable results.
Rebound in production.
Total domestic which returned to levels pre pandemic.
The added value of the incorporation of visa on a full year.
And fourth a favorable volume price.
These factors allowed the group to generate a record at that level setting high to treating tests.
Growth, 79% compared to the accretion.
At the level of the contribution of all business lines crude oil sales standouts, which by 2022 continue to 83% of group's second.
<unk>.
Performance at the refining segments highlight.
Triple its contribution competitive machine supported by its operation stability and record results.
The transmission and growth.
Had a share of 12%.
Yes.
<unk> to provide stability to the group's revenues operating cash flows and low emission solutions business.
<unk> to the.
34% in 2017 versus three one.
Significant contribution.
Yes.
G G energy usage in line with what was discussed munis calls Ecopetrol group continues to manage debt maturities for the third quarter 2000 feet.
Seeking to ensure the most competitive conditions in this volatile market environment as far as those heightened study so far.
The successful bond issuance.
Financial market.
$2 billion.
Partial repurchase the international volume.
Okay.
<unk> has sufficient refiners sales to 7%.
The debt maturities explain consume.
Close to $5 billion and there one $6 billion in net refined focus.
Timing is important to highlight how compared to peer companies.
Total group presents World class results indicators, such as <unk> and <unk>.
The margin per barrel.
<unk> bye.
The solvency and liquidity you can see how these indicators are in the market average despite the working capital associated with the fuel price stabilization fund.
Hey, Thanks for expansion.
Let's go to the next slide.
At the end of things into Ecopetrol group recorded a robust cash position.
$18, one trillion tests, where.
For the following items.
<unk>.
Operating cash flow generation.
Reached $36 two trillion vessels, mainly associated to the good performance of mission statements.
<unk> price environment.
Payments received during the year $18 three trillion tests from the fuel price syndication line.
Broken down follows.
Nation contributions in cash for 11 five vessels.
<unk> surpluses behavior of the nation, we're used to competition in our transfer of resources and liquidated obligations.
For $6 eight.
The bottom line and when do you need to.
<unk> to 'twenty six AG.
And this one is important to inform that Gordon to the update and energy plan, the national Central government and the 2018.
Pertaining to anything significant item between six four trillion pesos.
What's included to settle the accumulated balances as of December .
Accordingly, the publication of the general bucket of the niche.
Each season power to offset certain payments <unk> payments.
Hey, Brian .
Huge uncommitted budget surfaces.
Additional payments.
Okay.
On the other hand, new government initiated a gasoline prices.
It's critical to slowdown the speed south accumulation post the app.
Local versus international prices.
The resource is generated by the operation.
<unk> organic capital investments.
Tony 119 pests.
The covered outflows 18 point by Chilean pesos in cash flow of which 501 treatment versus respond to debt service and 13 torturing intentions to dividends paid to the company's shareholders.
And in terms of capital structure is important to highlight that.
Balance sheet of the group remains quite solid growing in equity, while maintaining a constant nevertheless that involves.
Let's go to the next slide please.
The Ecopetrol group investment plan at <unk>.
The range between 539.
Trillium assets.
Amounts to about five six to $6 $6 billion.
In line with our mid to the energy transition.
40%.
<unk> will be allocated to renewables self generation hydrogen transmission enrollments energy efficiency.
Cash self sufficient.
Other 60% of investments will be focused on energy securities and cash.
Our plan considers capex resources for a value close to seek treatment missiles aimed at generating heat actions in 2023.
Against our growth ambitions sharing this team.
Initiatives, namely standouts in Holland and France.
A change to a cheaper reduction in emissions of 407 kilo tons Sidoti.
Comprehensive water management focus on reusing, 40% of the water that is collected.
Enter retirement.
Leveraged 167 kilometers of intervening tertiary roads education to 70000 students access to drinking water for 60000 tons.
Finally, it is important to highlight that the financial plan robust generate an EBITDA margin greater than 40%.
<unk> greater than 11%.
Gross debt to EBITDA lower than 2.1.
Give the floor now to 90 of our like I mentioned, we will give you additional color about the positive evolution.
Equity charge SG.
SG.
Ecopetrol has been recognized by good performance in corporate responsibility in TMT by batteries and <unk> issues and users of the nonfinancial information reporting ecosystem. These recognition has been the result of the company's miguez processes and challenges.
Formats in environmental social and governance matters as well as proper communication to all stakeholders in recent years Ecopetrol has been adopting <unk> sustainability reporting standards and it has been participating in assessment in which the company TMT performance evaluated the lab.
Has allowed the company can included conformance and communicate more clearly and effectively its results in the last four years Ecopetrol has substantially improved its ratings in all did I mentioned weighted by the Dow Jones sustainability index in 2019, Ecopetrol had an overall score.
<unk> nine points and in 2022, we received an overall score of 76 as a result of such improvement Ecopetrol is now part of the Latin America, and integrated market and emerging market indices within the Dow Jones sustainability index and has been recognized as a member of this.
Sustainability yearbook, two consecutive years Ecopetrol CSD path has been up what an outstanding among its peers our improvements and progress are also being reflected on the CDP climate CDP water rate.
Our current PDP ratings are above the average of companies in the oil and gas sector.
Now turn the floor over to <unk> for remarks on Ecopetrol impact in the regions.
Thank you Myra Paolo.
We're proud to be a driving force of development for the country and the source of employment for thousands of Colombians with ROIC contributes to make the energy transition a reality this creation of social value was evidenced through the achievement of meaningful milestones in 2022.
Among which I would like to highlight the following.
Copper Troy group sustainable development investment portfolio amounted to more than 615 billion peso, 31% more than in 2021, prioritizing education Rod construction community infrastructure entrepreneurs.
Inclusive rural development and access to public services, such as water sewage gas and electricity. This investments focused on closing an equity gap and diversified local economies resulted in positive impacting national production generating.
GDP growth, 0.1% per year over 120000 students benefited from our educational programs equivalent to one 5% of that total the students enrolled in public institutions across the country by the end of the.
The year Ecopetrol reached their workforce of 129000 employees, 22% of them are people with low rate of participation in labor market. Furthermore, we facilitated direct and in direct connections for.
<unk> 1000 local companies.
Our supply chain network, we made it possible for more than 763000 people to have access to safe drinking water, thus, reducing the national got two axis. This essential service by one 5% Ecopetrol group continues to lead the implementation of <unk>.
<unk> investment project through taxes mechanism, we participate with 31% of the total Nashua quota allocated by the government contributing to closing in equity in 72 municipalities and 15 departments severely affected by armed.
Licht and poverty during the six years of the mechanism a total of 59 project, adding up to 258000 billion pesos have been allocated to the group generating social prosperity in the region.
Promote a fair and equitable energy transition. Therefore in 2022, the government assigned Ecopetrol to implement solar photovoltaic solutions for 766 homes and the department put two module to increase the coverage of electricity service.
In rural areas finally between 2019 to 2020.
We estimate an accumulated social environmental investment.
Three six trillion vessels.
As part of the Ecopetrol group's commitment to the transformation of Colombia, and the generation of sustainable value for all Colombian I'll now turn the floor over to Philippe.
Closing remarks, thank you very much beyond the year 2022 was a year with outstanding financial and operating results Mitch.
<unk> the established goals and with significant records achieved in our three business lines.
In March of 2023, we will have our AGM, our general shareholders' meeting where.
Where we will be able to present to our shareholders the balance of the year in terms of energy sovereignty.
<unk> safety.
Finance and operations.
2023.
<unk> will continue to make decisive progress thanks to a solid and highly qualified team, which will work in a business plan aligned with the responsible and just energy transition and.
And with a value promise to all of our shareholders.
I want to take the opportunity to think 18000 employees men and women.
Everyday in Ecopetrol.
Make the impossible possible.
With this.
I open the floor to question and answers.
Okay.
Thank you we will now begin the question and answer session first we will go with the audio questions and they will read and answer questions from the Todd Wyman.
If you want to participate by audio please type in the chart the number want to participate in the audio call.
Or you can type a question in the chat and it will be right. After the audio questions.
The first question is from Kosovo Vasconcelos from UBS you May proceed.
UBS.
Hi, everyone.
First of all thank you for taking my questions.
And Philippe first of all I would like to congratulate you for the time, let me Echo patrol and the great performance achieved in dispute.
We hear from UBS and leaves us well we show our success in the new challenges ahead.
Our first question, we saw solid performance in 2022 with a solid cash flow, allowing the payment of relevant events right that you guys. Just I'm all set but looking at 'twenty two 'twenty three we expect a lower average Brent and a slightly change on production and increasing capex and of course.
Thanks rate decreased to 55.
So in summary.
We expected a decrease in cash flow right.
What could you expect in terms of capital allocation for the company, especially dividends based on 2023 figures and so one can expect something closer to the 40% range.
Following the Ecopetrol policy and are there any discussions with the government about a possible change on the on this policy.
And my second question would you guys provide an update on the nomination of the new CEO for the company and comments from you on how the process is going is really helpful.
<unk>.
Thanks, Stefan Thanks for being here and thanks for your kind words. So the first the first question and I'll provide a bit of context, but.
Given where we are our capex for 2023 has been decided I mean, obviously, we as always have been.
We'll be watchful of what's coming there things from a macro perspective the change.
And I think the good news is that historically, we've and we've demonstrated that we're very quick and nimble we can adapt and we've learned from that having said that the.
$25 trillion to <unk> trillion in terms of Capex allocation stance.
And I'll ask Jaime to provide a bit more more context I know there is there are several variables and things that you've put on the question on I think it's worth and we spent some time in terms of the update of how the process to nominate and basically select.
The new CEO , Alaska, Mario power to help us with that so Jaime if you can start with the first part of <unk> questions that'd be great.
Good morning, everybody and OE docile.
<unk>.
I think.
There's a lot in your question.
That that I would propose to our priorities what are we seeing as positive trends versus what are we seeing as potential.
Pressures when we think about that outlook and I think theres a lot on the positive end.
Firstly the trajectory that we are foreseeing is one off production growth.
It's competitive production growth is not production growth at any cost.
You have heard about the outlook for the Permian you have heard about the outlook for gas in Colombia.
And these are all very very profitable.
And competitive projects, so production growth will be a factor and we are going to see it importantly in operating cash flow, which we see increasing.
Over over the next months and years to come actually.
The second thing that I would put on on the positive category.
<unk> prices and differentials, particularly differentials in particular some.
Some of you might have heard Pat during the previous call in Spanish that we are.
Probably in that juncture right now where there are some challenges, but the medium.
Medium and long term outlook is a positive one as well so that's something to bear in mind and thirdly, I think we cannot underestimate.
The collections for feedback because while we are seeing and while we've actually seen over the last nine months is actually a very very credible.
A very proactive approach from the government in terms of dealing with that balance, which actually translates to cash vertical patrol in some shape or form. So so I think those three elements are positive in the outlook going forward what are the pressures I think theres two predominantly one do you have.
Defied which is of course, the tax reform, but we always need to bear in mind that it's very relative to tax reform east linked to price bands. So it's not a set amount.
The way to think about it the more we earn them or we paid tax but the proportion is always one that gene favor of of the company. So I think that we need to see it in those terms.
And the second.
Pressure that we have is around debt service because clearly in the refinancing effort that we've done over the last 12 months has come at a time where.
Rates are a bit higher because of worldwide because.
Of inflation and that's going to be translated into some nominal.
The increase in debt service over the next months I think that.
All of that is positive I think that in the end the balance of that will largely depend on what the price outlook that you use.
The price outlook that we are using which I mentioned a couple of times, which is about $80 $80. Brent is one where we see a capital allocation remaining in the $5 billion to $6 billion per annum.
Over the next few years, we've actually targeted 20 billion for the three year period between 2325 that number stands.
<unk>.
And from a dividend sample what I would say is that the dividend policy of the company remains unchanged, it's 40% to 60% of ordinary.
Net income on what I would expect is that at this price.
And we will.
<unk> always tried to remain in the in the very high end of that price man. This of course will depend on how performance goals, but our policies are.
Our outlook remains very positive. Thank you. Thanks.
Thanks, Amy and Maria Paula if we can go to.
The second question. Thanks.
Thanks Philippe.
Good morning, everyone.
On your second question I would say that the process to appoint the new CEO for the company is undertaking by the board of directors with the support of first tier headhunters and complying with the CEO succession policy that we have in force in the company.
Processes advancing.
It is being carried out on a very serious and professional manner and I would say also that the board and its advisers are working to have results as soon as possible. Nevertheless, without jeopardizing the seriousness of the process and obviously result, thank you.
The last question is from Thiago <unk> of Morgan Stanley .
Hello, everyone. Thank you for taking my questions first of all I'd like to congratulate Philippe for all the work done and wish you all to have success.
I have two questions here. The first one is taking into consideration our exit production rates, which was quite robust is there any upside risk to the 2023 production targets.
And the second one is if you have any.
Any news on the path of the stabilization of funds receivable from the government.
Can we expect new collections in the coming quarters. Thank you very much. Thanks, everyone. Thanks for your kind words, so I'm going to ask Alberto why don't you take the first one.
Share your views on how we're seeing production and highway in terms of <unk> and everything else. If you can if you can provide some some insights albert thanks.
Thanks, Philippe Tiago good morning, with regards to production we maintained our guidance in terms of having a production of about 720 to 725000 barrels of Guillaume.
We take a look a conservative view in terms of production because we have to manage throughout the year different risks. The first one is associated with the seasonal behavior of the gas sales, particularly when you look at the December the second half of December and also the month of January .
We see always a reduction in terms of gas sales.
I also think about social unrest when.
When you look at January production, so far we have had already impacts in our Ruby Allison Daniels would ask there.
Production rates.
Because of social stoppages, but also we have <unk>.
<unk> shutdown coming from that Alka field from one of our partners. So we will have to continue manage these throughout the year.
Thirdly, we have a maintenance profile in our different operations.
We have.
Routing maintenance in both <unk> and <unk>, we will have to have a major turnaround in Florida for a change of the <unk> team, which probably will take between 510 days also we have maintenance in our triangle, where we have most of the mature oil.
<unk>.
In OPI Castillo to too many we will have to do some maintenance in tanks and also in pipelines.
We will need some repair.
Finally, the other thing that you have to consider is declined management, we have to replace every year between 100 on a home around 5000 barrels a day. So declined management will be fundamental and the capex that we have targeted for this year, we will cover that replacement offer.
So all in all we maintain our range of 720 to 725000 barrels oil equivalent per day.
Thanks Alberto on the highway.
Thank you Philippe a gaggle with regards to your question around tobacco and its outlook.
So I.
I'd start with saying that the balanced by the at the end of 2022 was up.
About 26 trillion pesos right.
And that's an important.
Number to have in mind, because it's actually the rationale for the <unk>.
For the allocation that the government made in each budget for 2023, while the government intended to do was actually a synchronized to make sure that the balance in <unk> by the end of the year match the budget allocation for the next year, which which it's actually.
Great news in the past actually I'll give you some history over the last 15 years of of our bank.
That had very rarely occurred that match between the budget and projections for Capex. So that's that's positive news.
<unk>.
The second point that I'll make is that.
With.
Dividend project that we announced yesterday.
Basically through dividend exchange, we're going now.
Meat, if you will about 21, 5% nearly 22 trillion pesos off of that balance.
Which leaves a balance of about 4% to five eight trillion get to be defined going forward over the next one.
Over the next few months until the end of the year.
The government has different mechanisms to deal with that.
Dividends east a mechanism, but its not the only mechanism.
Actually that the largest consideration that they have from a cash standpoint ease budget surpluses, so that <unk> can actually reach out to budget surpluses in other areas.
Find dose to feedback.
How will that occur on on what will the government decide on that.
We don't know.
Our understanding they haven't decided that yet, but what we do know is that it.
Doug I'll remaining east is pleased with the results of Ecopetrol for two.
22, very pleased and Theyre actually.
Support data of the <unk>.
Dividend distribution project that we released yesterday actually there was an announcement from the Ministry of finance today in that regard so that that I believe is also a positive positive news.
I think the third point that I would that I would mention east East what is the accrual rate of our bank going forward.
In the first eight months of this year, we accrued about three trillion vessels of our bank.
We expect that to to have a downward shift over the next few months the rate of accrual is going to is going to be reduced.
Mainly because the government has announced.
We are very committed to these pathway of increases in in gasoline prices and to the extent that those increases occur that the rate of accrual of the balance is going to be reduced over time. So all in all.
A positive outlook I think on the matter of a bank. If we go back 12 months ago, we had a.
Thats pretty pretty significant uncertainty about how this was going to be dealt with and that has actually been narrowed down to something that we see us.
As appropriate on more predictable incoming thank you. Thanks Jaime.
The next question is from Andres Duarte from coffee Colombia.
Hello.
Thank you for taking my questions first of all congratulations to all of the company's employees.
The outstanding results that you have.
<unk>.
And hopefully by the best of luck to you.
And again I really hope that you remain vocal with respect to our sector in our country.
The question is.
My question is related to gas.
Okay.
I would like to know what explains the quarterly reduction that was observed in Gaza production.
And the second question is related to hydrogen please explain the companys forecast regarding hydrogen production.
Sales, including self consumption local sales and exports.
If any.
Thank you very much thanks.
Thanks, Andres and thanks for your kind words, so both questions I'm going to ask Jamie to help us with that in terms of understanding what happened with gas on <unk> of last year and then our views on hydrogen so Jamie. Please go ahead.
Good morning, Andreas Thank you very much for your questions.
First of all the gas so what happen is that we had a plan.
<unk> in our infrastructure in the Dallas Fort Hills. So we were running these maintained during the fourth quarter and that was the main reason because we decreased production during that quarter. It was planned as he'd happen. So.
The routine operations that we do every year to actually be sure that the reliability of all the infrastructure in terms of gas is ready to deliver what is needed for aldi Colombian people.
Regarding hydrogen which is your second question.
We are producing 100 and 130000 tons of hydrogen per year.
90% of that hydrogen is great hydrogen and 10% is blue.
The hydrogen that we are producing today is being used in our own refineries to hydro tweet the fields that we sale that we produce and sale in Colombia and abroad.
In 2022, we successfully deliver our pilot to produce deferred molecule of green hydrogen in Cartagena refinery. So what we are doing now is that we are incorporating all the lessons learned and they know how to actually mature two mega projects that will.
Hopefully sanction the <unk> at the end of 2023.
Two projects.
We will produce about 9000 tons of hydrogen per year each of them.
We then electrolysis capacity of 60 megawatts because.
Because we are targeting the <unk> of those two projects by the end of this year, we are expecting to have the first molecule in 2025 or 2026, that's like the data that we are targeting most of these hydrogen will be used in our own refineries to cover at the efficacy that we have today, but we will have a supper plus.
Production that we will use to actually develop new markets in Colombia and abroad.
In 2020 in 2023, we will also deliver tool mobility projects in Colombia, one in Bogota and the second one in car to Hana, what we are aiming with those two pilots is to actually develop youll know domestic demand for hydrogen that of course will be a.
Very very important key issue for the next decade in the medium and long term. What we are doing is to actually take into consideration all the competitive advantage that we have as a country when speed radiation biomass to deliver competitive unconventional energy.
Resources that are required to produce competitive green hydrogen and so we are more than sure that for the next decade, we will have for insured portfolio to produce hydrogen in a massive scale not only for local production, but also to export but to actually sharing more details we will need to wait and see how these hopper of.
Opportunities is progress in the next coming years. Thank you very much and I have under that <unk> helps to actually get other understanding on how we are progressing on our hydrogen adient.
Thanks, Jamie Thanks Andres.
Do we have any more questions now we will answer the questions coming from web.
First question is from Bob <unk> of Barclays.
Can we have an update on the impact of frozen tariffs that prescient Petro one for water electricity on Aesop. Please.
Thanks, Peter Thanks for being here, thanks for participating the call what I would say on this is first.
As we think about ESR, obviously as the controlling shareholder of ESR first thing I want to say that we're very very pleased with the investment in terms of visa.
Over the last.
Few days or so and I am going to share a few.
The numbers in a few.
Concepts here first thing is that Isa has proposed to its AGM.
A very robust dividend distribution that accounts to roughly 88% in terms of distributions. So very very comfortable with what <unk> is doing in terms of its business.
That the considerations that went into the.
Recommendation for the AGM taking into account the.
The future and forward view the company has of its business. So from that point of view is not considering impact from from the.
Potential.
Any intervention in terms of targets in terms of transmission. So very pleased historical dividend and it's been accounted for in terms of the numbers that we're seeing.
And again underpins and supports the decision for the dividend distribution and the other thing that I want to highlight that.
And that we've been discussing over there.
Last couple of days is that we've now identified in addition to the value that we saw in the purchase some $360 million of synergies in terms of transmission and in terms of new projects in terms of transition that we can jointly do between aesop.
So I think it's.
Very very bullish very very bullish in terms of what that brings.
Thanks Peter.
Anything else do we have more questions. The next questions are from Frank Mcgann of Bank of America.
How are transportation costs for exports affecting net backs what are the expectations for crude oil and natural gas production in Colombia, and the U S. This year and the last question is what are the trends you are seeing in oil services costs are you seeing much upward pressure.
Sure.
Thanks Karina so.
Pedro can you help us with the first one and then and then we will take you there and then.
Alberto if you can help us with the second and third one that'd be great Pedro Okay. Thanks, Philippe Frank.
Thank you for your question on transportation when.
When we talk about transportation.
Cost basically we're talking about two portions of the pipeline transportation, which is regulated and in 2022 was actually slightly lower than 2021 because of our volumes now when it comes to the shipping side of the transportation cost.
At all time high costs of shipping, but it is something that is basically for the entire market. So so we're competing very well, but also I would like to take advantage of this question too to let you know that we have become very active in in the shipping because we set up a shipping days in 2021.
And we're doing more delivered to the customers and actually the numbers in 2021 was.
17% of our exports were delivered to our customers internationally and in 2022 because of the activity picked up really well and.
We basically.
Delivered a 37% of our export volumes are going into the international markets and that has actually become a new line of business that is.
Becoming a new source of income for the company. Thank you thanks photo Alberto.
Thanks Philippe.
Good morning.
With regards to production in Colombia, we are expecting 500000 barrels of oil on about 100.
<unk> 50000 barrels of oil equivalent coming from gas sales LPG and condensates in terms of U S think about 60% to 65000 barrels of oil coming from both Gulf of Mexico, and Permian and then about 10000.
Coming from gas in Permian.
With regards to service costs.
What we're expecting this year is an inflationary impact in this particular sector of about 17%.
But when you look at our lifting cost in total we expect that to be in the range of 10 to $10 $5 per barrel, which means that we are going to see.
An increase in terms of our inflation in energy and energy, which is the main component in terms of the lifting cost inputs.
Inflation coming from the service sector Boswell.
But with respect to corporate with our efficiency program that provided us with extraordinary results. During 2022 as a matter of fact in total the amount of efficiencies that we saw in 2022.
<unk> amounted.
Three six at Trillium business.
Thanks, Alberto Thanks, and thanks, Frank for being part of our call.
Do we have any more questions. Yes, we have the last two questions from Carlos Cardoso.
First one is should we expect no changes in management going forward.
And the second one how would operations be affected by the regulatory changes that are taking place.
Thanks, Carlos and thanks for being here so in terms of management as we've described before.
Our focus right now for the board of directors is in ensuring that the process to change or appoint a new CEO . He's done orderly and it's done by Apollo was hanging in a way, that's very disciplined and very thoughtful and.
Very methodical so I think that's happening in terms of management.
We'll need to see.
I'd say that over the years for those that have been following the company you have been able to see that we manage to.
Basically.
Create a very very strong world class team in Ecopetrol.
A lot of people that we've brought to the ranks have out of the experience that has been in ecopetrol for many many years and.
And people from different geographies that they wanted to come back to Colombia and have been part of this of this journey and have been part of this great results. So.
We'll see what happens, we'll see what happens, but I think the important.
Carlos is that institutions companies organizations prevail.
We protect those going forward in terms of operations and if there is any impact on regulatory changes there's conversations on those and I think we addressed some of that in a prior question.
And we will need to see what happens there is conversations around the national development plan. There are some specific.
Conversations around it.
Precedent being in charge of Craig the regulatory body for the next three months. So we will need to see how things progress how things Pan out.
At the end there is some impact that particular, the things around visa that I've explained before.
We're bullish we don't see impact in the short term, but again, we will need to be watchful, we'll need to see what happens on one what goes on in the next months or so.
I'm not sure if theres any more questions no more questions. Mr. <unk> you May now proceed to show her remarks, so so before doing that and I'm going to.
Take a few minutes of your time, if you guys can help me there is a.
A graph that I want to share with you.
And hopefully hopefully this provides some more insights.
In terms of.
Reserves.
There were some very good questions around production profiles and what happened in <unk>, how do we see this going forward, both Jamie and <unk> talked about this but I wonder if you can just turn your attention to this graph, which is something new that we haven't shared or disclose before.
I'll try to be.
Very executive on this but.
The first number is the.
2.011 billion. So 2000 11 million barrels 2 billion barrels of reserves and yellow, that's one peer reserves and thats. The number that we've historically been reporting it basically shows the highest one peer reserve number in the last eight years and.
That number is basically 75% crude and 25% gas.
That's the number that we've all seen and that you guys have seen.
And here, we're showing and this basically tries to two.
To paint the picture that we.
Shared with the market over the weekend, when we talked about reserves.
The three P reserves or total reserves.
It would be $2 8 billion barrels.
And roughly I think it's 21% gas.
This shows look we're sort of I wouldn't say unveiling, but we're sharing with you.
Some of the numbers that we see in terms of the pipeline.
Or in terms of what comes next.
So we're expanding the vision from the one peer reserves to three peer reserves.
And what would say one would say or could say look let's stop there, but again if you look further out in time and in terms of maturity of those resources.
We're also sharing our view on contingent resources.
And you say that you will see that we're saying look it includes gorgon amongst a lot of other things and.
And those could be $2 3 billion and roughly percent or 40, 14% would be gas.
So we think about gas and back to the question that was made addressed by Jamie.
We have $2 eight Tcf right now this would be an additional one nine tcf.
If we go further out in terms of maturity, we have discovered resources that still need to be appraised and that's includes amongst other things mature.
And that would be 3 billion barrels and roughly it's a 30% gas.
And then further out.
Is it the technical teams the Geoscientists geophysicists that people in exploration think about what's next.
If we are seeing in terms of prospective resources 6 billion barrels 53% gas. So we wanted to share. This with you. This is something that I think will be used going forward. It provides a more holistic view and it's our own view of how we're seeing resources.
<unk> progression and then where do we stand in reserves. So we hope this is helpful.
So.
Thanks, everyone for being part of the call today.
And thanks for your feedback thanks for your comments. Thanks for your questions all of those help us immensely in deeply in terms of better understanding urinates what are the areas of concern of interest.
What are the things or areas in which we need to do better in terms of explanations in terms of providing supporting material.
In terms of ensuring that this relationship between the company and yourselves.
Is stronger and stronger every time is just stronger in gets <unk>.
Much better and much more fluid in terms of communications. So thanks for everything thanks for your support thanks for your kind words today and this is on a personal note my last conference call our results for Ecopetrol.
You have a solid team here in Ecopetrol.
Thanks for everything you do.
Thanks, guys, thanks to the team as well.
The ones that are here theres a lot of people.
In the backstage, there's 18000 men and women that do.
That turned the impossible into possible things every single day.
So thanks for everything stay safe.
Have a great day.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
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