Q1 2023 YPF Sociedad Anónima Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by.
At this time I would like to welcome everyone to the White P. F first quarter 'twenty to 'twenty three earnings webcast.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question at that time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press Star one.
It's now my pleasure to turn today's call over to Pablo Calderon ne.
Investor Relations manager.
Sir Please go ahead.
Good morning, ladies and gentlemen, this is pablo literally white B S I get about it.
Thank you for joining US today, you know with first quarter of 2023 earnings calls.
This presentation will be conducted by our CEO .
<unk> and our CFO Alessandra.
During the presentation, we will go through the main aspects and events that explain our first quarter results. I'm. Finally, we will open up the call for questions.
Before we begin I would like to draw your attention to our customary statement on slide two.
Please take into consideration that our remarks today in answer to your questions May include forward looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplate anybody's guess, it's Matt.
Our financial figures are stated in accordance with the idea for us but during the call. We may discuss non <unk> measures such as adjusted EBITDA.
I will now turn the call to Pablo Please Pablo go ahead.
Thank you Pablo and good morning to you all we are glad to report a solid beginning of the.
Our operational and financial metrics.
Our total hydrocarbon production continued with a positive three brings.
Bringing to market, although 500 any limits wholesome wyden of oily keyword in Friday.
Representing an increase of 2% on a sequential basis and 1% when compared with the same period of 'twenty 'twenty to Motorola.
I really like to highlight the evolution of our crude oil production with Jessica maintained during our stuff as you go loop presented a few weeks ago is the focus of our short term growth strategy.
It's going to be a 3% sequential increase and a 7% interest.
Expansion of adjusted EBITDA remained strong in the quarter, surpassing once again, the $1 billion Mark expanded 12% from the previous quarter and 5% on a E R over weird Macy's.
Sequential improvements come as a result of how're you doing hydro car, Ron Paul Hudson and payer processing levers at our refineries.
Our companions also by lower Opex, partially offset by lower realization prices of our refinery pallets when comparing to the previous quarter.
Operating the Sars or meet our bottom line to come in positive territory. Once again with net income reaching $341 million in Q1.
In terms of our investment activities, we started investing $1 $3 billion, 78%.
On the first quarter of 2022 on track to meet our ambitious plans for the year. What are the main focus was once again directed shale operations, which concentrated more done 50% of it.
On the financial side free cash flow was almost flat during the first quarter.
They've got the $70 million.
Our net debt to $6 billion.
The net leverage ratio.
One two times.
And a final note.
Let me briefly comment on the positive reimbursement developments related to the international rig count.
Churches.
Peterson.
Case on March 31, the New York Court found that wipe it has not gone well.
The ability I'm always no damage to the claimants have caught up in this niche plaintiffs' claim against wipe yes. We believe this ruling to be of significant value to dissipate.
Let me just expand our potential contingencies I should say so to appeal that decision wipe yes, we can.
Continue to defend it since in accordance with applicable law and the Maxus case on April six might be perhaps a sign I see them and that women with <unk> or <unk>.
For a full release on these changes.
James in exchange for payment of 287, 5 million each subject to the satisfaction or waiver of.
So think conditions you Julien.
Call it up at once.
All of our prostate Evans.
We're convinced.
That these mega decision, we will send a fair and reasonable outcome for white.
And we allow the company to continue focusing on generating value for all our stakeholders.
Summary, we are pleased with the results achieved using first Q 'twenty three.
Although we know it is full of challenges.
We believe we are attacking the initial steps to deliver on the ambitious goals. We set for the year I now turn to Alessandro to go through some further details of our operating and financial results for the quarter.
Thank you Pablo let me begin by expanding on Butler's comments, although the evolution of our oil and gas production.
During the quarter, our total hydrocarbon production delivered 511000 barrels of oil equivalent per day.
Lighting, a strong international expansion in our crude production, reaching the highest quarterly mark since 2016 at 278000 barrels per day.
And beyond <unk>.
Natural gas production increased 2% on a sequential basis, while Ngls remained essentially flat.
The positive evolution in oil and gas production on a sequential basis came once again and that's expected on the back of the solid increase of 6% in our total shale production.
Moreover, during this quarter, our total conventional production remained flat when compared to the previous quarter, mainly as a result of our continued strategy of extending tertiary production, which recorded an expansion of 7% versus the previous quarter and almost 50% against the same quarter of <unk>.
'twenty two.
In that sense in mainland tenants bear our flagship project.
Early production represents almost one third of the total production of the block and in the other three pilots being deployed at such a winning Mendoza travel in June Unlisted Allison Santa Cruz, we have continuous harvesting promising results.
Moving to costs lifting averaged $14 $6 per barrel of oil equivalent across our upstream operations.
Presenting a minor increase when compared to the $14 $5 in the previous quarter.
More particularly for our Shreveport have operations lifting costs increased by about 8%.
Hi, good activity and energy costs during the quarter overrun the expanded production, but still remaining at a very competitive level of $4 per barrel.
Regarding prices within the upstream segment.
Suzanne realization prices averaged $67 per barrel in the first quarter, representing a minor increase compared to the previous quarter, but leading to a significant reduction in the discount to Brent prices, which declined by about 7% in the same period.
On the natural gas side prices remained sequentially flat, averaging three $1 per million Btu aligned with the plan gas prices for the summer season.
Swimming in Delaware shale operations during the quarter, we completed 38, new horizontal wells in our operated blocks.
We also continued increasing the risk of drilling activity to enlarge our inventory of drilled and uncompleted wells.
In that sense.
In the first quarter, we drilled a total of 48 new horizontal wells.
Four of which were in oil producing blocks.
And 14 targeting shale gas.
Presenting a new quarterly record Mark in terms of drilling activity.
Okay.
It is also worth noting that during this quarter, we continued with our strategy of developing back on water beyond our core hub blocks.
In that regard during the first quarter with diving following wells at our fully owned Loma, Malaysia block and we have just finished drilling one well Atlanta, Kansas block targeting natural gas production.
The new <unk> during the quarter led our shale production into further expansion.
On a sequential basis, our shale oil production increased by 9% and our shale gas production expanded by 4% averaging over 90 92000 barrels of oil per day, and about 17 million cubic meters per day of gas.
And when compared to the same period of 2022 shale oil production expanded by 31% aligned with our strategy of accelerating the monetization of our shale oil operations.
In terms of efficiencies within our shale operations.
During the quarter, we lost some ground in terms of the development costs at our core have operations, averaging $9 $9 per barrel of oil equivalent primarily on the back of continuous cost pressures, although operating metrics remain healthy.
And it is also fair to highlight that the development cost for our core how operations reported in previous quarters was revised slightly upwards as a result of some retracted tariff adjustments as well as updated EUR estimates of some specific wells based on actual productivity recorded in recent months.
Yeah.
Finally regarding our investment in facilities required to unlock our shale oil production in January we put in operations, our third crude oil treatment facility in Banco Marco located at Bandura Yasuda with an initial processing capacity of 4000 cubic meters per day, which is targeted to be expanded to 12%.
Meters per day during the year.
Let me now briefly comment on the progress made in relation to the midstream oil projects aimed at unlocking the evacuation capacity of the Nokia innovation.
First regarding the expansion of the existing system to the Atlantic Although has made steady progress on its second stage of expansion.
Aiming at adding about 20000 barrels per day of transportation capacity to the system.
It reached commercial operation during the third quarter of this year.
In addition, Ot has achieved solid progress in the critical path of its expansion project, having initiated the preliminary works for the construction of two new storage facilities or 50000 cubic meters, each and the offshore terminal at Port <unk>.
In terms of financing or top of the large portion of the total capex to be funded through prepay. The shipper pay contracts both companies all the lull on O T that the local capital markets with three year local notes or $50 million. Each thus securing a further portion of the funding required by the projects.
Moving to the Pacific Route the Trans Andina pipeline of the OTA OTC system responded well to the inline inspection test, resulting in only minor repairs that were already executed.
Thus the pipeline is now in operating conditions to resume exports to Chile in coming weeks after it over 15 years of being idle.
In addition, we have continued making good progress in the construction of the Bakken Walter noted the pipeline that will allow us and other producers of the basin. So they like the crude oil produced in the core operations of a comparator to the transcendent pipeline and further north into our <unk> refinery.
The project is at about 60% completion and is expected to start operations between September and October of this year.
Finally, we have also achieved solid progress on the engineering design process for the Bakken water sewer pipeline and export terminal hub.
<unk> achieved about 70% completion.
In addition, we are progressing steadily with the environmental impact studies for the full project.
It is important to highlight that even though the project is and will continue to be led by <unk>. We have already initiated conversations with other major players of the Nokia innovation, who already showed interest in participating in the project.
Switching to our downstream operations, let me start by highlighting that in 2023. The company has decided to reorganize the business segments consider for financial reporting by separating the downstream activities into those related to the midstream oil refining transportation of oil.
<unk> products and petrochemical production into a new segment called industrialization.
From the commercial activities of refining and petrochemical products natural gas and trading activities that were grouped into another segment called commercialization.
The segment reclassification is aligned with the organizational change that separated this business under the leadership of two different vice presidents.
Now regarding our domestic sales of gasoline and diesel.
It'll dispatch volumes decreased by 3% when compared to the previous quarter driven by a contraction of 6% in diesel sales, mainly due to the lower seasonal demand in the agribusiness that was particularly affected by the severe drought that the country experienced in recent months and partially offset by a 2% increase in gasoline demand.
<unk>, which set a new quarterly record.
In a year over year comparison diesel demand remained almost flat while gasoline sales stood 7% above a year ago.
In terms of refinery utilization the revamping of adopting unit at the La Plata refinery that eliminated bottlenecks in the processing of light crude oil are compounded by the revamping of the pumps tension western numbness in the nuc innovation allowed us to increase processing levels to 307000 barrels per day.
5% higher than the previous quarter, and 9% above a year ago, achieving the highest quarterly mark in the last 13 years.
In addition, during the quarter, we managed to maximize our refinery conversion levels, reaching a record of gasoline and middle distillates production.
However, in spite of the higher refinery output total fuel inputs increased during the quarter, representing 12% of total sales sold in Q1 in order to build up inventories that remained below historical average levels in the preceding quarter.
Okay.
In terms of prices during the first quarter, we continued with our strategy of adjusting prices of local feels in a way to mitigate to the largest possible extent the effect of the depreciation of the currency, while reducing or at a minimum by both extending the gap between the pricing of local feels vis vis internal.
Third party piece.
Consequently <unk>.
Average fuel prices measured in U S dollars decreased 3% sequentially, but still 16% above Q1 2022.
And the gap between local fuels prices versus import parity declined to an average of about 20% in the first quarter, while further declining to about 15% in April and more recently during the first days of May So a smaller discount of about 10% on the back of the continuous general.
Our trend in international prices.
Finally on the financial front.
The beginning of the year resulted in another quarter delivering sound operating cash flow, which increased 12% sequentially to about $1 5 billion on the back of the higher adjusted EBITDA, coupled with positive working capital contributions.
This strong cash generation was almost enough to fully fund our investment plan payments of interest and other expenses, resulting in a slight negative free cash flow of just $17 million.
And despite this minor negative free cash flow that led to a marginal increase in our net debt to $6 billion. The Hyatt 12 months rolling adjusted EBITDA permitted to maintain our net leverage ratio flat at one two times.
In terms of financing during the first four months of the year, we have already raised over $1 billion through tapping the local capital markets in two locations in January and in April and by securing several trade related loans from relationship banks.
Obtaining net new funding of over $500 million 294 million of which took place in Q1 and the balance during April .
It is worth highlighting that these funding took place at very attractive financing costs benefiting from the average crush in the local market as demonstrated by the negative funding cost of minus 5% achieved on our recent two year dollar linked local notes.
Furthermore, during March we entered into a fully committed short term revolving credit facility denominated in vessels with three local financial institutions for an equivalent of $120 million.
It is worth noting that this is a product that is not widely available in our local market, but the we eagerly pursued as it provides us with flexibility to manage our liquidity more efficiently.
All in all these financings provide the right platform to secured our funding plan for the year, including the liquidity required for the settlement of the Maxus legal case.
Okay.
On the liquidity front, our cash and short term investments increased to $1 3 billion as of March 31.
Compared to $1 1 billion as of the end of December of last year.
And in terms of cash management, we have continued with an active asset management approach to minimize FX exposure.
<unk> the prevailing regulations that restrict our ability to hold assets abroad.
In that sense.
In the context of limited available dollar SD instruments in the local market and given our increased liquidity. We ended the quarter with a consolidated net FX exposure of 21% of total liquidity.
Finally, when looking into our debt profile I would like to highlight that our healthy liquidity position comfortably covers our debt amortizations for the next 12 months, given a very manageable debt profile for the rest of the year.
And with this I conclude our presentation for today and open the call for your questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.
Your first question comes from the line of Walter.
<unk> with <unk>.
And are your line is open.
Hello, Good morning circular thing in collaboration with our results.
Two questions if you could first levodopa before.
Well the export potential for the company.
I understand that the company has.
Goodbye.
In the short term, but.
If there is some potential effects for even the connection.
Hi, Greg.
If you can provide some detail.
Thank you.
Okay.
The next one.
One thing and the other thing is.
What do you see the next six months, we got bumped pricing.
Given that we are even Victor a year.
Hi, I'm sorry.
The company has received a comp ratio.
Sure.
The government.
Great to hear.
Bond prices.
Okay.
Thank you.
Well good morning, Walter and thanks, a lot.
<unk>.
Yeah.
Let me let me address first the question about the export potential.
As was recently announced in the media we have a we have reached an agreement with <unk>.
To take advantage of the.
Availability now of the turnaround in our pipeline that after several months of work.
And after performing in line inspection.
Should be banking operations in coming weeks.
This is a milestone and a key milestone given the over 15 years.
The plan has been idle and that clearly from the back of the increased production not only.
Based on White BFS production, but also from all the other players.
And the Nokia innovation and the congestion.
So we believe that that's.
And that will continue to expand the total export potential of the country and more specifically for <unk>.
Allow us to become a structural exported once again.
So as I've mentioned, there is a short term agreement to start with the volume of up to 40000 barrels a day that should start to be bumped our Sally us.
The first days of June .
In a few weeks from now and I.
I don't know if that volume wipe it will probably have a share of about 40% to 45%.
Total volume should increase over time, primarily on the back of the new pipeline that we are building the back on what I noted the pipeline that will connect the court have.
Pushed our lenders that should allow.
Total pumped volumes to increase.
At the first stage, we believe that that volume will probably be in deals at all about 70000 barrels a day or so before the end of this year and hopefully overtime.
That should continue to grow.
We move along the following months until probably the end of 2024 to the total capacity that the transfer Andina pipeline has about 110000 barrels a day.
So we believe that that.
That's gonna be a structural improvement on the structural export potential.
For White P F and for other players in the in the Nuc innovation.
Given that we are we so far continue to purchase about 20% of the total crude that we.
Processed in our refineries.
But clearly as we continue to expect our oil production to increase in coming months and in coming years. So what's also presented an hour.
Strategic outlook are a.
A few weeks ago in New York.
We would expect.
Total purchase volumes to decline over time.
While at the same time, we increase our exports.
And so overtime and as we said probably in five years from now we are expecting to reach other percentage of about 35% to 40% of our total production.
Target the export markets, while we reduced our net purchases.
Level of about 5% to 10% of the total.
<unk> volumes.
As mentioned just really clear that's over time within the next five years.
And moving to your second question to prices.
As was commented during the presentation, we so far we managed to increase prices in several locations.
For the most part once a month.
We are trying to at a minimum keep track of the evolution of the currency I'm trying to maintain.
Sure.
Prices in dollar terms, our net prices in the lead times are stable as possible. So.
So far we have managed to achieve that and as mentioned during the first quarter.
The average of our net dollar prices. So it was just 3% below the average for the fourth quarter.
Even though international prices came down further than that.
And that continues to be the case, so far and for the following months, we expect to continue with that.
On strategy.
Doing a or moving or adjusting prices in a way to compensate for the evolution of the currency to the largest possible extent.
Of course being conscious of the global environment, the local environment in terms of macroeconomic reality.
The reality of the inflationary pressures so.
We will we will remain conscious of that but still trying to adjust prices in accordance with the evolution of the currency and of course.
Maintaining a healthy relationship.
The international prices as well.
Thank you very much for you here.
Okay.
Your next question comes from the line of Carlos <unk> with Morgan Stanley . Your line is open.
Hi, everyone. Thanks for taking my questions I have two questions. The first question is about funding can you talk about your funding requirements and strategy part of 'twenty to 2020 to 'twenty four.
The second question is about the FX devaluation.
He's like bad for preparing the company in the event of a sharp currency devaluation.
How do you see fuel prices evolving in that scenario to ensure margins remained healthy. Thank you.
Good morning, Thank you Carlos for your questions.
In terms of funding.
Commented during the presentation.
We have started the year.
On the right footage we have.
Already in the first four months of the year have already raised over $1 billion.
Tapping, mostly the local capital markets and our relationship banks.
As expected in his comments.
It was our funding plan for the year.
With that we those exercises we have already reached a net funding of about $500 million and.
And we expect to continue with a similar strategy for the remainder of the year. We we clearly have tackled most are the most relevant.
International Amortizations that time that we had during the year. So we only have left.
And a smaller amount of international cross border amortization.
For the following months and and so in that regard we expect to continue to mostly focus our exercises in the local market.
You know clearly we see very competitive financing costs. As commented also you know both in the January and the April .
Local bonds that we issued we achieved a very interesting funding costs and and also <unk>.
Creasing, our trade lines.
On top of that there is also a possibility of a high probability of lodging.
Refinancing in the lodging the cough led to a loan that was secured last year, we are working on potentially extending that.
That loan both in terms of tenor and in terms of size and that we expect to be.
Finally, I saw negotiations and documentation for that in in coming weeks.
So all in all clear.
Clearly, mostly focus on the local market in trade lines, but then also looking into other instruments, such as east enlargement of this loan potentially.
The next year.
Clearly still too early to say.
But most likely we believe that that will still be room for us to continue to tap on these two main sources and of course, we will keep an eye on the international markets as well depending on how our bonds our international volumes perform.
We may definitely consider tapping the international markets at some point.
And in terms of.
The potential impact of a significant FX devaluation clearly.
Difficult to know, whether that's going to be that's going to happen and when.
But of course, we have our sensitivity analysis, what I can comment on that is that.
Although.
The steep devaluation of the currency will definitely erode.
Revenues as it impacts.
A large portion of our of our revenues, which are related to pump prices.
Roughly speaking in the order of 55% to 60% of our total revenues come from the sale the sale of local feel of yours in the local market.
Which are priced in pesos.
But it's also fair to note that a large portion of our cost both capex and Opex is also denominated in pesos and and should also in that case benefit from a potential devaluation of the currency.
So all in all we would say that the net that is a net impact negative impact that the devaluation will have on the differential between our revenues and costs.
But that will also depend on our ability to pass that potential devaluation through to pump prices in there in a rapid way.
So we would expect.
And as commented on the pricing strategy, we would expect.
To be able to do that in an efficient and.
The way.
But that of course will depend on the.
General environment, I will will prevail at the time and of course, depending on our ability to actually do so that will result in the net impact that we will end up seeing in our cash flow generation.
Yeah.
Yeah.
Again, if you would like to ask a question press star followed by the number one on your telephone keypad.
Your next question is from the line of.
Paula Greco with T. P. C. G. Your line is open.
Hi, Neely.
I have a couple of questions.
I would like to know how our Guangdong congratulations Dave.
Can you tell us how long.
Mike go ahead.
And one follow up on this one is equivalent chunk.
Continuing on.
Our earnings call.
Oh Dear.
It will take to Hanmi on a 15 day Hollywood columns in basketball, London quick reaction.
Hi, Paul Good morning, and thanks for your questions.
Clearly we have seen.
Some.
Deterioration in collections, particularly in.
Related to the planned gas.
Where we have seen.
Some further delays in collection.
From a net oh from a nominal perspective decent months on the lower seasonality of the plan gas invoicing. So in terms of actual working capital during the first quarter.
We had a positive effect because we have been collecting on.
On I see somehow invoices and wildly the delays.
Place on lower seasonality.
Invoicing so.
<unk> net working capital perspective, it was a positive variation in the first quarter.
Down the road, we definitely expect and we have the wing.
Our best to try to collect and to get the normalization of the collection on the playing out in terms of.
<unk> delays, we are not seeing any major impact there.
But all in all and as you probably recall our focus is on crude oil production, which clearly has.
No relationship whatsoever to these.
Collection.
Mainframes.
Because of course, we monetize that through palm prices and there we see no no delays in collections and and then also now as we are going to move forward with a portion of our production being exported also it's completely separated from the realities of.
What is more.
Natural gas.
Issue.
Related to both commercial and.
And.
The government payment on the <unk> program. So I would say that all in all of course, it could potentially have an effect in the future our working capital.
Balances are.
It does not affect our production growth plan, so that was an investment class.
It has less of an impact on <unk> than it might have in other companies that have a larger proportion of gas in their in their businesses are in their in their plants.
I would say that so far we are not seeing or expecting any.
I live in impact in our activities or in our investment decisions.
We continue to focus mostly on signing most of our capital investment to our crude oil opportunities.
Understood. Thank you and then I have another.
Got it.
The new content with an app.
If you could tell us why it wasn't right that we have.
Well in terms of revenue.
Turning to represent.
Or.
Okay.
Yeah.
Well in terms of the commercial agreement, it's a it's a formula but that basically relates to export parity prices.
Total <unk> and on top of that.
Some logistics a premium.
Basically taking into consideration the two to two <unk>.
Sure the benefit of the improved logistics.
Both of our sites.
Sites will have both.
The the suppliers not just wait to hear about the other producers as well.
This is an app that is substituting.
Imported crude.
From from C inputs to this.
Inland.
Inputs through through pipe. So basic basically it's gonna be our next full parity plus.
Pricing on this.
On this commercial agreement at least for this initial agreement that is for the first start two months in.
In terms of impact for revenues during the second quarter is going to be a very marginal because as mentioned before we are only going to start bumping and.
In the first days of June so, it's going to be only less than a month.
Of Ah experts that will actually be recorded in the second quarter and even in the third quarter is going to be limited to a smaller amount.
Or the smaller volume until the back and whatnot. The pipeline is up and running which is expected at some point in late September early October . So we should start seeing the full benefit of this.
New exports into Chile.
By the fourth quarter of this year.
Where it should start representing around 10% of our total production.
Perfect. Thank you so much.
Youre welcome Paula.
Yeah.
Your next question comes from the line of Louise Carvallo with UBS. Your line is open.
Alright, Thanks for taking the question has basically two here. The first one is a Bob and construction bottlenecks.
Discussions about.
The construction of pipelines and of course holidays with Brian in terms of the audit.
Production growth over the next couple of years. So if you made I don't know give a bit more color in terms of what are the main challenges that youre.
Youre seeing in terms of potentially I don't know suppliers or I don't know licenses and so one would be great. The second question.
In the past and in Argentina analysis, some specific rules for the export on agri of soft commodities in terms of.
Say accessing DSA the FX rates for example, right.
Our company.
As you know potentially becoming.
Larger exporter of oil so would be great to hear.
Our views on on the conditions that.
The company is seeing in terms of the rules to follow.
<unk>.
Additional levels of oil exports.
In potential revenue.
From my one thank you.
Yeah.
Hi, good morning.
<unk>.
In terms of.
Bottlenecks or pipeline expansion.
Again as commented we are seeing a very good progress.
We are very comfortable with the progress we are achieving.
Directly and indirectly right because some of these projects are being executed directly by White P. F <unk> and some of them by third parties like our participating companies OLED violent.
In both those cases we.
We're making good progress.
As expected the transcendent pipeline should be up and running and in operations now in late May early June so that's a key milestone.
We are making good progress on the construction of the <unk> pipeline, which we are still.
Seeing or expecting.
In early fourth quarter or late September early October so, we're making good progress there.
Clearly access to all the <unk>.
Flow of imports.
If somewhat.
More troublesome these days of course, but at the end of the day.
The relevance of this the relevancy of these projects.
Finally get things.
Moving and we are not expecting any major impact.
From this particular situation in the.
The Finalization of these projects and then in terms of all the while in a day again, we follow that.
From our side, but clearly those projects are being run by by those companies.
And we are seeing good progress there both in terms of the actual.
Construction of the actual works that are being performed as well as the financing.
As we mentioned both company stopped the local market and they are and we're making good progress in terms of their financing as well. So at this point, we feel comfortable we believe that the.
Potential.
Restrictions or or noise related to inputs.
We so far don't expect them to have a significant impact in the.
Evolution of this of these projects and then finally on the back.
South or like a multi shore project.
We are making good progress on the engineering, that's a project that should Uh huh.
Help or can.
Contribute to the Debottlenecking of Buckeye, Martha from 26 onwards, and so clearly we don't have time, but of course that doesn't mean that we don't need to.
We continue to.
Good progress and keeping a close eye to that project.
Ah.
In the current.
Right now no no not just in the future.
So in that case.
We are also making good progress we are finalizing the environmental studies and we expect the public hearings for environmental approval has to take place in the coming months, so that should be a key milestone.
For that project that goes into it.
A new territory and in both potentially of Newport.
So that that will be and milestone to follow.
The watch and once that is done then.
And then the rest of the project will it be mostly related to construction. So those upfronts, we we feel comfortable with the progress that we're making.
And in terms of export resolutions regulations.
Well the secretary of energy has already allowed for.
Firm exports into Chile.
So clearly to make a well to take advantage of the transcend and pipeline and then in terms of currency regulations. We are disappointed don't expect any specific.
Regulation related to crude exports, but rather to be.
Effective though to be within the current regulations that require exporters to bring dollars into the country and to sell those at the official effects.
Although you know and as you know there is another regulation that was enacted last year not yet fully implemented that provides for a specific or benefit or access to the official effects to our oil and gas companies.
For several usage related to our incremental production compared to a base year in 2021, so that that should provide for a specific benefit.
Just related to exports, but mostly related to increased production.
That should be.
Great tool to access and to manage.
The X axis.
And but yet we are still waiting for the full implementation of that regulation, which is still lacking.
Okay, No Super Super Thanks, very much and very clear thanks for the answers. Thank.
Thank you Luis.
Okay.
Your next question is from the line of Marcello Gloomy Arrow with credit Suisse. Your line is open.
Good morning, everyone.
Thanks for taking my questions I have two from my end.
The first one is on costs. So we saw a lift.
Lifting costs, almost flat sequentially, but I mean coming from an increase.
Compared to last year.
I would like to know what I mean, how do you see lifting cost evolution looking forward into 2023 or 'twenty 'twenty four I mean.
As we advance and have more new unconventional production and the mix should we expect lifting costs reduce and.
And the second question. The second question series on a few imports. So we saw an.
An increase of imports despite and increased refinery utilization rate. You explained that you were like beauty up your batteries during the quarter. I mean this is just wanted to understand what should we expect from that side going forward I mean should imports.
Go go down or should wipe you have to keep the current level. Thank you very much.
Good morning Marcelo thank.
Thank you for your questions.
In terms of costs.
We are working hard in trying to contain.
Cost pressures.
And and clearly we've been mostly successful during the first quarter.
However, we continue to see cost pressures affecting.
Our our overall performance.
But as you have said the higher proportion of shale or unconventional within our total portfolio should allow us to overtime decline the average cost the average lifting cost for our total upstream operations.
All in all even within both both sides well clearly on unconventional we win.
We have seen our costs in previous quarters, increasing and that was mostly related to the decline.
We were experiencing in production.
As far as we manage to.
Maintain production stable within crew conventional crude and mitigate to some extent the decline in net conventional natural gas. We should also see or be able to contain the increase in lifting cost there too to a large extent and so while we do that.
We increased the share of total shale within our portfolio then I should have said, even though we may continue to see some cost pressures.
We would expect the average lifting to trend downwards over time.
And and in terms of fuel inputs.
Clearly as you mentioned the the main reason for having continued to have a relatively large percentage of inputs related to our total sales. So it was mostly related to the buildup in inventories.
We are now on average historical inventory level. So we got to a point, where we're comfortable with inventory levels.
For the following quarters, particularly the third quarter, we might also see.
Import levels relatively high compared to historical averages, mostly because of a program maintenance on our refineries. So I would say on average for the year, we should be close to somewhat below the current level of inputs.
But with some potential reduction in the second quarter, but then broadly some increase again in the third quarter.
But that's a that will also depend on the overall level of demand and whether we.
Beyond the program maintenance you know, how we continued to perform on an hour.
Processing capacity, which is committed.
We'll reach a historical high in the first quarter and.
And we will do our best.
Outside or besides this program maintenance to maintain.
Assessing levels to the maximum possible extent.
Awesome very clear thank you very much.
Thank you.
Your next question is from line of zeal Fernandez with <unk>. Your line is open.
Okay.
Good morning. This is <unk> lenders from violence. Thank you to the Hull <unk> finance team.
For the materials and sustain late in the call to take my questions have.
I have three questions I would like to run them one by one if you don't mind.
The first one is related to the back of more to South project that you mentioned, if you could provide us a little bit more details.
About potential pipe capacity or upgrade if this is going to be geared toward swift swift maxed or VLCC <unk>.
<unk> exports anything that that might be worth mentioning.
Yeah.
Hi, good morning.
Well.
Let me address it with information that we can comment at this point this is a.
A project that is steel.
On a design stage.
Though we are moving faster with it.
As we commented we are well advanced with the engineering design process and.
And so far we expect this project to ease a project that could be expanded over time in a way to address.
The growing need for evacuating back I wanted us production from 26 onwards.
And so far we are looking at a project that could go from a minimum flow of about 30000 cubic meters a day.
He will be expanded to a total of about 120000 barrels a day once it's fully expanded.
Sorry meter cubic meters per day.
So from an initial 30000 cubic meter 1000 cubic meters a day to a total of 120000 cubic meters a day. It once it's fully expanded and that will be an efficient way from a capital perspective to handle that.
And and move along with that project, while we and the rest of the industry will continue will likely continue to see the expansion of <unk> operations from 26, one which.
In terms of.
The you know the design of that project, we are seeing.
The pipeline that will for the most part go parallel to the existing <unk> pipeline, but then connect to our Newport further south.
<unk> location is still being.
Fine June most likely and as commented before.
Is it going to be a new port in an area.
In the provinces of Rio <expletive>.
Where we can where we can exploit or we can take advantage of.
Natural deeper waters.
That should allow for the entrance of Vlccs, and hence making exports more efficient. So that's the general idea of.
That project.
That's great no sorry, but I would like to go into another question another project debt.
You may now be able to fully comment on but.
Regarding the offshore initiatives in either the Austral basin or off the coast of the province of <unk>.
What else can you share about this.
Initial.
Maybe testing wells, and if theyre going to be geared towards gas or oil.
Anything on economics would be would be useful too.
Okay.
Yeah.
<unk> is definitely still too early to comment.
We are seeing there is.
Clearly on the project.
Trial off the coast of <unk>.
Writers of Marvel Plateau.
That's a key project that where we are targeting to drill there.
First the deepwater exploratory well in ever in Argentina, That's a project.
That is in the block kind of 100.
And where we are partners with equity note and shell and that's a project that is being or Oprah or a.
Blogs that is being operated by our partner equity.
So as mentioned, we we are expecting and are working towards being able to drill or to start drilling before the end of the year or at the latest early next year.
We well we have high expectations for such a project.
But there is still much work to be done to be able to comment on.
You know the all the potential that that we expect.
Even though as we have already disclosed I mentioned, we are targeting resources, India or that all 7 billion barrels of oil. So clearly the focus there is oil and and.
So the expectations are very high for that project.
And in terms of the Austral basin, we are looking into some opportunities there to to enter into.
Some existing concessions that some some other players have.
We are looking into that and in that case, mostly for gas.
But again they are it's a it's an analysis that we're performing and so it's a little too early to comment.
Okay, Great and I don't know if you have anything to add on Petronas and the LNG project.
Yeah.
Well not much to add we continue to work together with them in.
Performing the both the technical and economic analysis too to get us comfortable with a final investment decision. As previously commented we are still away from from that decision and there is still much work that has to be done and our best we will.
We would expect to have to enter into an FIA.
Not before the end of next year.
So that's as measure still much work to be done there to be able to move on with the actual.
The development of the project.
Oh, that's great. That's all from my side. Thank you very much.
Sure My pleasure.
Okay.
There are no further questions at this time I will now turn the call back over to management for closing remarks.
Well. Thank you very much everyone for joining this call and for your continued support and we definitely remain open for any further questions that you may have.
And have a great day.
Ladies and gentlemen, thank you for participating. This concludes today's conference call you may now disconnect.
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Sure.
Yeah.
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Yes.
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Okay.