Q2 2023 Ecopetrol SA Earnings Call
[music].
It will be a question and answers decision at the end of the presentation before we begin it's important to mention that the comments in this call by Ecopetrol Senior management include projections of the company's future performance. These projections do not constitute any commitment as to future results nor do they take into.
Count risks or uncertainties that could materialize as a risk.
Salt Ecopetrol Atlassian no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr. Ricardo.
CEO of Ecopetrol be honest, Scott Vice President of development, Jamie buys Vice President offline mission solution Alberto Consuegra C O O and Jaime Cogito CV Oh. Thank you for your attention. Mr. <unk> you may begin your conference good morning.
Everyone and welcome to the Ecopetrol group's second quarter 2023 conference call.
Our open edge.
Financial results.
We appreciate your participation.
I would like to highlight the dedication of our entire team.
Has allowed us to achieve outstanding operating results in such a challenging market environment second quarter to produce about 728 that was somebody who's a flaw in the cable and per day with a general increase of 23, though with some partners.
This is the second quarter of 2020 two.
Yes.
See you in the last three years these dynamics.
As a result.
It's a question of our operation and increased production from strategic fields, including <unk> and <unk> in Colombia, and <unk> in the EU and Asia space. This pizza hut.
A crucial role in supporting our growth, although we need to meet our production stoppages for day to day in the second quarter. This year, we recorded revenues of 54 3 million basis.
All $44 six trillion pesos.
Our net incomes.
Good point.
One 3 million pets. This.
Figure out a consistent with the 2023 financial plan. These results are supported by.
Firstly.
Encased operators, but four months through breakthrough and pollution bump in locks.
In some of our transportation system, finding supports and clean fuel pollution loads.
Our with finite.
Secondly.
The tips funeral results confirm yet got it.
And a coffee product <unk> nature.
A positive impact of this change rate on sales.
An efficient commercial strategy during the second quarter, we reached the following significant.
Our strategic milestones.
May we complete negotiations on the collective bargaining agreement for the next four years.
Negotiation took place.
Within that construct it and respectful dialogue with union organizations finalizing an agreement that will concurrently bassinet hour what it gives the company undergone immune.
Yes.
That was notified of the international arbitration people notice the CCU regarding to the claim side.
On the in generally procurement and construction contract for the expansion.
Some of the refinement.
That'd be great and approaches.
Through our work with filed by Atlantica in modest 2016.
About eight.
Contractual breach.
The decision notified.
Subject to corrections lesions and classifications.
Of the biopsy.
Saint Laurent.
In the top spot of the medical talent for Colombia.
'twenty three plan.
The business monitory of.
Corporate reputation ratifying ecopetrol as the best company for attracting and retaining talent in the country. This first half of 'twenty to 'twenty. Three we have added more than 23 trillion pesos in tons, but to the nation with taxes royalties.
And dividends, maintaining our firm contribution so not tuna development on the order trend this quarter and the account placebo to the fuel price stabilization pumps have the lowest <unk> co.
Since January 20, <unk> finally, I would like to highlight that the cumulative capex execution to the second part of the reach.
<unk> 3 billion pesos being the highest yearly.
A yearly view.
Last seven geos, demonstrating our commitment to innovation and growth. Please continue the nest slide during the first half of the year, which plays a highly uncertain macroeconomic situations.
Possibility of a recession in the developed world.
High interest rates bank in Australia, and the United States to get there with the slow down.
The Chinese economy.
Impacted the price of crude oil and refined products introducing greater polarity.
Despite these challenges we felt.
Because of our company so put us resilience.
Tablet.
We have found opportunities within the current situation.
Good focus on intermediate goods.
Strategies are setup with chase.
South grades similar to those we offer we cut being able to exploit the opportunities with our ongoing strategy.
The bus market.
Markets and destinations emphasizing the strategic position of.
Who are trading subsidiary in Singapore.
Ecopetrol Treaty nature.
<unk> has sold over 85 million bother so put it all in the Asian market.
During this quarter.
Sales to the Asia, continuing represent 50 Paul.
Our response to Ecopetrol.
<unk> also successfully to unsafe telephone notes that could cut is always in line with the companies.
Z agenda, it's a big step for the second part of <unk> Central tree.
62 million.
Million dollars, an increase up 42% over the <unk> quarter.
The uptick reports of the carbon trade index hostile with us to commercialize 10 million borrowings.
Accumulate carbon offset crude oil as of last July also the commercialization of hospitals with recycled plastic with a nurse or level 350 tons and the secretion of pipe projects in Colombia has boosted the energy transition.
And Silicula economy in the region.
All the commercial patrol amongst us alone as a trend in the differential of the crude oil basket, ensuring our positioning in the Atlantic.
Corporate travel group continues to action.
All inclusive this strategy.
Efficiencies and competitiveness, allowing us to uphold the company's solid operating performance despite.
<unk> internationally and market challenges, we are competing in our teams ability to meet their bus cities and remain committed to sustainable growth and success in this dynamic business climate I now give the floor to the <unk> Vice president of sustainable development, who Wheeler.
Dave you.
Our progress in the company.
Yeah.
Thank you Ricardo.
Ecopetrol commitment to generation of social body with evidence during this quarter to advancements in the performance so far in social and environmental investment plan, which in 2023 totaled 766 billion.
Figure equal to nearly 5% of the comparable investment by the Nations General budget I would like to underscore the most relevant achievements during this past quarter.
I like the start of the second phase of the meta fruit supply network program in partnership with the food and Agriculture organization of the United Nations over the next three years. This program should positively impact 3000 farming families and 32 Association.
In the region.
<unk> production change.
Commercial viability.
But a cooperation agreement was signed with the National government and companies in the industry to page 43 kilometres right on Google We are less road located in the department of met with an investment of more than 240 billion.
This project what.
So they are going to struggle productive and program development ability Nokia region.
Over 1 million hectares, with agricultural development potential and generating a positive impact of over two 5% on the regional GDP.
Also emphasize the successful national summit of their capital and to printer shipped social investment program with the engagement of 1576, Intrapreneur micro and small enterprises 45 municipalities that will receive benefit.
This year, we made of <unk>.
Our school quality and retention programs.
641000 students, which is 8% of the total involvement in public educational institutions nationwide regarding the expansion of higher education coverage through the Ecopetrol graduate program. This quarter, we awarded 94 north corner.
The students in Florida area, Retool and historical total of 1761 beneficiary to date in health care, our mobile unit. When he that movie has consisted more than 6500 people in seven municipalities.
As of the mid Magdalena region, we need access to low complexity health services, which is equal to 8% of the vulnerable population in these area regarding access to your activities, namely gas water and power supply our social gas program certified.
Gosh, so disconnections for more than 5200 households, and the departments of Atlantico, Samsung dead and cost on that concerning water supply. We highlight the provision of $6 5 billion pesos for the construction of one public drinking water.
That benefits more than 13000 people from there when you ethnic group as a part of our commitment to provide water supply solutions and the department of like Washington, and access to electricity. We participated in a task force led by the Ministry of mines and energy.
Seeking to define a portfolio of initiatives that can develop into self sustaining energy community. Our social investment portfolio has been further strengthened it with the allocation to the Ecopetrol group 27, new projects valued at 100 and <unk>.
6% to 7 billion peso us through the white for taxes Snaking Hazem, our business group has the highest participation in this mechanism 37% of the nation wide allocation. Finally, we would like to highlight the social dialogue processes carried out with the communities in our area.
Insulin in the quarter, we conducted 13 dialup processes involving more than 1000, social lactose nationwide with the participation of community action boards academia businesses and local institutions. In addition, we launched the ethnic inclusiveness.
Support program called forming and diversity training, where you and pass the severity of ethnic communities and that Wahid out and put two module to strengthen their individual and organizational competence in this way to our business lines would contribute generate social value.
Throughout the country closing gaps and improving the quality of life for those most affected by social inequality I will now turn the floor over to Jaime who will present, the key financial results for the second quarter.
Thank you Liana.
Ecopetrol recognizes that generating long term value in a context of energy transition requires an integrated balance between the achievement of financial profitability goals and the delivery of our strategic technology, environmental social and governance commitments with our stakeholders.
Our performance dashboard show significant progress in this regard.
So the main accelerators the strategy generated benefits for close to up more than one trillion pesos in the first half of 2023 through increased revenue generation cost reduction avoided costs and productivity increases on environment. The group are aware of the active role it must play.
In terms of climate change and energy transition has made progress as follows regarding emissions reduction during the first half of 2023. The group achieved an accumulated reduction of greenhouse gas emissions of 1.09 million tonnes of Cotwo equivalents in scopes, one and two mainly in the upstream and bow.
Onstream segments through different enablers, such as fugitive emissions venting or flaring optimization energy efficiency programs and the use of renewables.
Cumulative reduction of one point 40 million tons of C. O two equivalents by 'twenty two 'twenty three with respect to the 2019 baseline is predicted on water. The following has been achieved first an average water withdrawal of 657000 barrels of water per day for industrial.
US well below the withdrawal limit of 724000 barrels of water per day established for the operations second a 49% reuse of freshwater withdrawal achieving an over compliance of 123% compared to the targets set for the first semester of 2023 and third a 20.
9% reuse of production water affected by the pressure in injection flow systems, and a din oriented and Nokia, but compensated by the good performance of the other two indicators as part of the ambition to incorporate noncommercial and alternative energy sources for self consumption and promotion of cleaner energies the company plans to incorporate.
400 megawatts by 2023 currently 208 megawatts in operation and another 200 megawatts are under construction to deliberate set target regarding social matters. In addition to the milestones previously mentioned by Diana the following stand out.
4298, non oil jobs generated that contribute to diversification of local economies and the 55659 students benefited through quality and educational coverage projects in terms of governance. The company maintains a solid and transparent corporate governance.
With a level of independence of 78% of its board of directors and a 33% female representation. These guides the fulfilling of the company's strategy and evaluated in indexes such as the Dow Jones sustainability index, where he'd Ecopetrol group aims to maintain or improve the corporate governance rating obtained in <unk>.
22, please move on to the next slide during the first half of 2023, we achieved outstanding financial indicators amidst an environment of lower crude oil and refined product relaxation prices roti recorded its second best result, since 2016 and close the semester at $14 eight per.
Sent above the target of 10% for the year and higher than the average of around 11% reported by peer companies to date the impact of higher physical contributions and the increase in capital employed was partially offset by higher operating income in the last 12 months EBITDA margin was $44 three.
Percent, mainly explained by the lower average Brent price compared to the first semester of 2022, and the lower cracks of refined products diesel gasoline and jet, which was partially offset by the net effect on revenues and purchases associated to the higher average exchange rate. Likewise, there was an increase.
In activity costs and operating expenses associated with the increase in activity in terms of production refinery throughput and transported volumes as well as some inflationary effects during the semester. The Ecopetrol group recorded a higher EBITDA margin compared to its peer companies, which reported an average.
Margin of around 34% regarding EBITDA by business line, a 78% contribution of hydrocarbons stands out underpinned by the upstream and midstream segments transmission and toll roads contributed with 16% of the EBITDA mainly associated to the results of the energy transmission segment.
Finally, low emissions contributed with 6% of the EBITA explained by a higher gas contribution the gross debt to EBITDA indicator remained stable at one six times below the target of two one times for the year the debt equity ratio was one one times, primarily due to the higher financing use daughters.
Wyatt mainly by Ecopetrol S. A <unk> in the first half of the year. During the first half of 2023, the Ecopetrol group generated an operating cash flow of 5.2 trillion pesos. As a result of the solid operating performance the positive effect of the average exchange rate, which offset lower radiation prices and inflation.
Ari effect on costs operating cash flow accounting for the balance of Quebec, which I will explain in detail later would be 18.2 trillion pesos at the end of the semester.
Please move on to the next slide in the first half of the year, the corporate trolls organic investments amounted $12 three trillion pesos the highest half year figure in the last seven years, 41% above what was executed in the first half of 2022 and in line with the target for 2023 of between 25 point.
<unk> and $29 eight trillion pesos. This demonstrates the company's execution capacity in line with the targets set out for the four pillars of the 2040 strategy and contribute to our commitment to the economic growth of Colombia, and the other countries, where we operate the hydrocarbons business line are strategic.
Priority for the company and S and enabler of investments in the energy transition closed the semester with a solid execution for $8 four trillion pesos, which represents 69% of the group's investments. These investments were representing growth projects throughout integrated chain, both in Colombia, and the United States.
The investments in low emission solutions and T E. S. G closed at 1.5 trillion pesos.
Which sees it got 1.3 premium passes were allocated to gas projects focus on assets located in the PNM onto and other exploratory blocks in T. ESG resources were allocated to the carbonization projects and fishing water management and operations energy efficiency fuel quality and hydrogen.
Investments in the transmission and toll roads business line amounted to 2.4 trillion pesos and corresponded to projects executed by Isa in energy transmission toll roads and telecommunications. These investments allowed progress in the construction of the electric circuit and in improvements aimed at increasing the reliability.
The existing network as well as in that route at the La <unk> at Alcon and Rutile, a surreal road projects in Chile. Please move onto the next slide at the end of the first half of 2023.
Total recorded a consolidated cash position of 13 trillion pesos explained by first on operating cash flow generation of 5.2 trillion pesos, mainly associated with higher sales volumes due to higher production the solid performance of the midstream and downstream segments as well as the energy projects.
This was partially offset by the increase in working capital mainly due to the accumulation of the Fitbit account and the payment of income tax in some subsidiaries secondly, the outflow of investment resources for organic activities for $10 seven trillion pesos, mainly made by Ecopetrol and its subsidiaries.
Permian Isa and Senate and thirdly, the outflow of resources for the payment of dividends for $2 six trillion pesos to minority shareholders and subsidiaries regarding the management of debt maturities for 2023 article patrol, we continue to advance in the refinancing strategy.
With which in June is carried out a partial disbursement of close to 693 billion pesos from the financing line with Bancolombia the prepayment of debt maturing in 2023 forks $205 million the issuing of bonds in the international capital markets for $1 $5 billion.
And the launching of the repurchase offer for around $822 million plus interest for the prepayment of the remainder of the international Bond issued in 2013 executed in August as a result, the violence of maturities for 2023 at the end of August is close to $198 million.
Corresponding to principal installments of long term debt as were the average cost of debt between the end of the first half of 2022 and the first half of 2023, the cost increased 28 basis points and closed that approximately 6.07%, which represents a highly controlled growth. Despite the generalized context.
Higher international interest rates. It is also noteworthy that despite the higher cost average exchange rate and indebtedness the increasing financial expense between these periods was only 1%, reflecting the companys ability to manage its debt even in a challenging rate environment. The company does not expect a substantial.
Increase in the cost of debt for the remainder of 2023 regarding the feedback balance the account receivable closed at 39 trillion pesos, reflecting an accumulation of 13 trillion pesos. During the semester. Likewise compensation was made without transfer of resources between the banners receivable from the <unk>.
And the dividends in favor of the nation for 8.4 trillion pesos, leaving an amount of $13 two trillion pesos pending for compensation is important to mention that thanks to the adjustments in the price of gasoline on the price environment. The monthly accumulation of this effect has been decreasing and is expected to.
Below one Chilean peso per month in the second half of the year. Finally, it is important to reiterate that the financial priorities of the Ecopetrol group continued to be the value generation through the delivery of the investment plan proactive and competitive debt management and the distribution of dividends as cash conditions allow.
I will now pass the floor to Jamie bias, who will give us more details about the low emission solutions business line.
Thanks Hank.
First half over the year Big <expletive>, and LPG production reached 160000 barrels.
Borrowings.
Train, 2% updated production.
Bobby.
And maybe that 2000 142 billion pesos, we found it would be the margin.
Two 7%.
Can you infer stupid cargo nice our operations well.
Obscure fighting cancer.
Sure of a wide range of niche of beach and bakery tragic Oh, no emission solutions.
You need to significantly contribute to our strategic objectives.
I would like to highlight the reduction of gas from selling bulky. These P. Rama hours Blanca bills by the means of connecting them to the gas market to offer. It. Additionally volumes of about 100 and Btu per day BCH of deep analysis, because they've used in these shows.
Of more than 36000 tonnes of C. O two we've only a year.
So we're able to implement energy efficiency initiatives that led to reduced tied peek on what our two megawatts of consumption equally volume can be electricity consumption.
<unk> Poulsen comes and then all their 100 M T. He got beat you up there.
And you'll get management.
As you know council and the use of Navy and Peanuts.
As for sales generation of energy, we sell you the market update.
We continue to work on sustainable not be meeting during the second quarter upstream thing first.
First we target to be neither financial support to natural gas because the gas threat broken upfront savings.
He passes that includes I mean, thousands by Ecopetrol.
Our soup C D. I think yeah, we knew its transportation fleet.
Laurie gas powered groundwater trumps.
Ratios and finally, we've been either deploy hydrogen refueling public transportation boss.
For termination.
Two parts off C. H D D to E. D. S. T made it that on these even shouldn't be sustainable mobility, we'll actually see a reduction of more than 500 savings in terms of field too.
I wouldn't wait for personal remark on a cooking from airports screen to the wellbeing of the Colombian people debate a program to connect with many of them for many of these do their natural gas fleet has delivered 4843 connections perfectly Wheaton passing find me.
We were an area of the block Nida and around saying, Oh, Cory I'm kind of I'm sure gas has been the main pulse to meet the target.
Also saying you know great names I believe allows us to expand its program torque wrench.
And the other 4000 families to be trained to sweep. In addition, we extended the micro LNG plant operations were not been hunting vendor, providing we know you have any people, who got supply theory, sanding Calvin and Tommy.
The company has done I think can we become a mountain of pork, Sweden reached its renewable energy portfolio go back in new technologies have been introduced to our opportunities panos fashion biomass geothermal and small scale type deal.
The operational lease that Cathy, yeah, and San Fernando solar farms as well as they can pay us long hydro plant.
It was just to reduce 5880 <unk> Tom.
Oh, two equivalent and say 6000 915 million pencils.
I think require ultra clean to each week. We are also making progress in that comes to auction off can you talk a little tight capacity.
Uh huh.
We made a lot less Hugo 56 megawatt co pay I guess, what you call me as soon as bonds with 15 megawatts and cold Garcia with their staffing needs and wants.
Which we'll constantly look to the incorporation of one time thing and one megawatt to our renewable energy matrix banking in Australia can you finally last year, we scaled the energy policy issue.
For three days more than 3000 people, including a co pay for those employees.
Our national and local leaders.
<unk> gathered to share no niche of the national and global content, we must be.
Technological trends and challenges of the energy transition.
Continue to leverage the consolidation of the picture for the Beasley Lang Frank.
Directv peanut clogging H R.
Two things or our 24 year strategy and your deep backgrounds Barnes I will now pockets over to Alberto who will talk about the Mi operation last night.
Thank you Jamie.
<unk> in the 'twenty to 'twenty three exploratory campaign reached 40% by the end of the semester as we completed the drilling of 10 exploratory wells seven of which have hydrocarbon potential and are located in the Dynamo study in Dallas to having gas condensate potential in the Monterrey boot heels on one with Nash.
<unk> gas potential in northern Colombia in Cordova four this quarter I would like to highlight the announcement, we made about the success of that the number one exploratory well operated by Ecopetrol located in car T. L. Unwavering to department of meta confirmed the presence of seating degrees API.
Crude oil.
Extensive testing is planned to begin in the third quarter of 2023, we made important progress in the assessment of onshore discoveries.
In Northern Colombia, India out of the seafood area early production connection of the poorly no one unless you cannot tell discoveries to the existing infrastructure is underway.
Extensive testing is expected to begin by the end of 2023 for potential commercially in 2024 with regards to the flamenco discovery located in the mid Magdalena Valley. The plumbing, because one is now commercially viable and the production license.
But to be awarded during the second half of 2023 in order to proceed with the extension of Commerciality for flamenco 213 Wells. Finally extensive tests are being carried out in the upper Magdalena Valley and El Nino, One I need my market two wells and in CPO nine on the home.
I don't know retail wealth brokerage in offshore exploration activity in Colombia includes assessing the results of the Gorgon two appraisal well on the drilling of the glaucoma, one well in the same area.
<unk> is expected to reach total depth in the second half of this year.
We continued with pad drilling activities of their work and work the one well as part of the appraisal process of the Orca discovery I'm with the planning of the appraisal campaign of the <unk> discovery to start in 2024 as part of the ongoing consultation with government agencies mediation agreements were signed.
The National hydrocarbon agency Anh, and the Afghanistan, asking I'll do the FEMSA, who did he got an established national State legal defense agency concerning controversies regarding the exploration and production agreements for the photo Giannis and Myron Gray areas.
Go to the next slide please during the second quarter of this year, we achieved production of 728000 barrels of oil equivalent per day up three 3% versus the same quarter of 2022, driven by a solid performance of frugality and positive results of the drilling campaigns.
Tania Shaw and Permian. These results were obtained despite the negative production impact of around 6400 barrels of oil equivalent per day during the second quarter of the year due to social unrest issues, including the capacity will still pressures as well as load restrictions and the time.
Larry shutdown of the gas plants in Q Doctor do.
Due to attach to the cannula demand convenience pipeline, we continue to make progress in Decarbonising, our upstream segment. During the first half of the year. We highlight the development of projects that will eliminate benzene emissions the costa janthina for at Tasiast production facilities in line with our commitment.
To reduce methane emissions by 2045.
During this period the upstream segment succeeded in reducing 141000 tons of steel to equivalent emissions figure, which is above expectations for the semester.
Go to the next slide please after three years of the start of operations in Permian.
<unk> venture between Ecopetrol on Oxi reached a record production at the end of May over 100000 barrels of oil equivalent per day.
For ROI junkies with approximately 62000 barrels of oil equivalent per day corresponding to a corporate trust participation.
In addition to the production in the Midland Basin, we highlight the startup production in the Delaware area after drilling and completing the first 19 wells during the second quarter of 2023, we drilled 22 Neal wells totaling now 279 wells are reaching a net.
Production for Ecopetrol before royalties of 58700 barrels of oil equivalent per day.
By the end of the year more than 110 wells are expected to be drilled production should reach an annual average daily production in the range of 62000 to 64000 barrels of oil equivalent per day before royalties for Ecopetrol on the T. ESG funds paying me enough.
Maintaining low carbon intensity based on zero routing prairie.
Methane monitoring continuous production facilities, along with other practices, such as sunglass storage facilities to reduce emissions at the source.
Please continue to the next slide for the midstream segment transported volumes increased year on year by nearly 20000 barrels per day, primarily as a result of higher crude oil production in the Janos region greater availability of both refineries as well as operational optimization.
In the refined product transport systems. So far this year 10 reversal cycles have been carried out in the base and then audio pipeline, ensuring the evacuation of production from the field.
Likewise.
Turning up dip route was implemented to ever quite convinced through from <unk> that are out there.
Loaded in our culture station as a heavy crude diluent the bottleneck in production of approximately 30 million cubic feet of gas in the Jay Brown field. During the second quarter <unk> continued to perform a colour touch operation from the when I went to Le Meridian terminal to let the macro terminal two client part.
The amount of products in this region of the country affected by restrictions on the Pan American Highway in line with our key ESG strategy. After three years of work led by our Samsung partnership with all the Windows General sodium Dallas all deal.
Toby Center, and how do you like Colombia, RBC and other regional entities. We highlight the completion of the beat them on glad project, which restored and rehabilitated 39, two hectares of mangrove and the <unk> Bay in corridor contributing to the natural regeneration of the area.
Finally, the ministry of mines and energy.
Through the issuance of resolution $2 79, or 2023 temporarily suspended the updating of crude oil transport tariffs that takes place in July of each year. Therefore, the current targets will remain in force until the tariffs for the following period are set in accordance with the terms.
Tablet by the regular let's continue with the next slide please in the downstream segment. The Cartagena refinery achieved a record quarterly throughput of 209000 barrels per day, thanks to the continuous operation of the Cartagena crude oil plants interconnection project IPCC bites.
In Spanish as well as the high operational availability of the plants during the quarter we reached.
Integrated throughput of 427800 barrels per day, a 17% increase versus the same period in 2022 in line with our commitment to contribute to the improvement of air quality in Colombia, and deliver cleaner fuels with standout a record production of diesel and gasoline.
Jet fuel for local supply in compliance with the resolution 41, all three that establishes the fuel sulfur content limits for Colombia into Q2023 we reached an integrated refining gross margin of $44 per barrel.
As a result of higher refinery throughput with plant availability levels, surpassing 96%.
Compared to <unk> 2023, the margin was mainly affected by a contraction in global demand reflected in lower diesel and jet fuel prices and higher crude oil prices by the end of the year margins are expected to remain at the double digit level.
These <unk> scheduled maintenance will be carried out at both refineries during the second half of the year, ensuring the reliability and the integrity of our operations during the quarter, we made progress in achieving various milestones of which I would like to emphasize start maturation of the project to produce sustainable.
Aviation fuels and renewable diesel in the barrancabermeja refinery contributing to Decarbonize the aviation sector. The startup of the electrical ISR project in SMT that aims to generate hydrogen from water using solar panels energy source to partially cover the operation.
<unk> self consumption the execution of the five G technology pilot test up there about uncovered refinery with the aim of implementing industrial technology solutions in the operation, which will enable efficiencies and maintenance and operations processes. We continue to advance on the zero fuel oil path.
As Jason production of AC 30 quality asphalt.
Why don't I cover to make out of refinery.
<unk> opening up new market opportunities.
Let's move on the next slide please during the first half of the year.
Chances of one six trillion vessels were achieved.
Which one one premium vessels contributed to mitigate the inflationary effects that continue to impact the group's costs unexpected.
On this front.
To highlight the multiple initiatives that how about all dose to optimize dilution.
<unk> cost of heavy and extra heavy crude oil.
Plantation of production stoppages that have contributed to reducing lifting costs as well as energy efficiency and start to use with the use of technology solutions and so generation lifting cost as of June 2023 amounted to $941 per barrel a year on year increase.
<unk> $13 per barrel, mainly attributed to inflationary effects on energy targets, well services and chemical treatment, whose impact was mitigated due to achieve the efficiencies of $24 per barrel.
Refining cash cost decreased by 14% compared to the first half of 2022 explained by increased throughput and exchange rate variance offsetting higher costs from greater operating activity and inflationary effects the cost per barrel transported ourselves June 'twenty.
23 was $2 seven at $6 per barrel, which remained stable versus the same period of 2022, primarily due to the aggregate effect of higher operating costs.
Later average devaluation of the peso against the U S dollar and additional volume transported the total unit cost as of June 2023 reached $45 $6 per borrower.
14.7% decline compared to the same period of the previous year, mainly resulting from the effect of a higher exchange rate and an increase in trade that volumes. It should be noted that there was a 700 pesos per dollar year on year increase in the average exchange rate in this period.
Which resulted in an impact of approximately 340 billion pesos in operating costs and expenses I now give the floor back to our CEO , we got about ROA.
Thanks.
The transmission.
Wrote business line generated positive operating and financial results in the first half of the.
A year.
As a result, we are primarily <unk>.
Saying it might be in its business in Brazil and Colombia.
Pulse and sheet.
Is it cold in a 10% contribution by business line to the group's revenues.
16% input to EBITDA.
8% participation in net incomes for the FERC hospitals each year. The most really by minus two for the quarter includes the allocation of two logs awarded in the energy transmission.
All true by the Brazilian National Electric Energy agency as well as seek sustained showed in Brazil, and one clinician in Colombia, the startup of the Shadow seven two doses.
<unk> someone a lot a couple of Libra project.
Inception to date as.
As modern bulk operation in the Santa Monica substation, Barb Godin reliability and declination up renewable and this is probably.
<unk> will represent additional revenues up $10 million.
Continuous at bison in the construction of 50, Paul energy transmission projects, which represent the addition of hulbert pulse.
825 kilometers of transmission lines to the network and will generate revenues of approximately $250 million when they enter operation. Finally progress continues in the execution of additional work in the rutile of deals.
Andrew.
Although Canadian concessions, which we generate new revenues and extend the terms of the.
Concessions I would like to highlight that in this first half of 'twenty 'twenty. Please.
The Ecopetrol group demonstrate exceptional resilience and solid operational capabilities, we need that challenging landscape.
This was a chip.
Hard work and dedication as well as years of support and commitment by every member of our organization to the devotion of our team worldwide on the call.
Liberty to recognize the strategic opportunities, we continue to ensure sustainable growth with us toady.
A question of the investment plan.
In Colombia from deposit shortage in the Genesis for the entellus to the offshore our stations in the Caribbean and globally from Chile sort of our mission.
All to all business lines to our trading company in Singapore, We will continue to focus on delivering operational excellence innovation and commitment to the energy transition with great enthusiasm, we invite you to celebrate with us in September .
Teen Unlevered study.
Our at least in the new Georgia Dock has changed.
We hold an event to share our achievements financial results.
But on the path to our 2040 strategy finally, I wish to turn.
All our employees on Investor partners for their continued support.
All of you.
David This conference today.
Thank you for your time I know open the floor for questions.
[music].
Thank you we will start our Q&A session. If you want as your question. Please write in the chat number one and follow the instructions.
Thank you for a maximum of two questions. So that we can improve for all the questions. Our first question will come from Andres Cardona from TD Bank is in line with a question with the cardon now the floor is yours.
Good morning, Thank you for this opportunity.
I have two questions. The first one is with respect to the EBITDA margin in the downstream segment I understand there is an impairment because of the essentially are resolved and the reduced margins of petrochemicals, but I would like to understand if there are nonrecurrent events perhaps.
As for revaluation of inventories that would explain this impairment of this segment and second my question is if you have an estimate at the present value of the indemnity for Redfin God.
And maybe you could.
Give us the perspective of the company regarding the possibility to recover these resources.
Because it has been published in the media and also at the leaving of the Minister of mines is there any possibility of waiting for you all auction auction itself for oil fields in Colombia. Thank you.
Yeah.
Yeah.
There's good morning.
Thank you for your question.
With respect to their first one.
I don't know about their effect on the EBITDA and the downstream effect and inventories I would say.
That's.
And there's tens yeah, we had an inventory effect and accumulation in the first months of the year, whether the drop in the second Q and that large.
The.
Tourism of essential amounted to $5 million.
Talking about the refineries the inventory effect, we've had cumulative in the first half of the year has been positive in the case of Banca we had an accumulation of a volumetric inventory because of the drop in the demand, but in general well cut the hand, but ranke.
We've had lots of inventories in the whole downstream segment to give you an idea of it.
Do you feel that the inventory, but we got that had this biomarker was $27 million positive.
These hobby and EBITDA al.
1000 $20 million so the inventory effect in the first.
Mr. I would tell you is positive.
Less than 3% as compared with every time.
We haven't had any adjustments.
Or one time adjustments.
Hi, Lee you may complement this.
Yeah. Thank you want to yes that it is with respect to the.
Downstream.
I don't have much to add to what Walter said, we don't have any exception all material issues in the second quarter and why do you have seen in terms of margin is just a reflection of.
The change in the environment conditions, but still the down margins are still very appealing and competitive also.
All I would say that.
And with respect to your question about repeat God.
As it is a public knowledge.
In early June we received the news of the favorable ruling for the refinery in the field with C. B I.
Today's the owners Mcdermott.
And this is.
Gives rise to a potential expectation of recovery in the future.
That's the follow our fares that their ruling is made firm. This is something we will be expecting by the end of the year and once we have the firm globally.
We will be able to formalize a number off procedures for the recovery of those comps with the counterparty.
To the extent.
But the strategy for recovery on the dialogue with the counterparty shed light on DAU and MAU timing matters.
All of this recovery.
We will be Justine.
The financial statements to reflect that expectation.
And on the educated manner, that's what I can say now thank you.
And is it and the last question.
With respect to the leaving of the Ministry of mines and their disease or possibility for new routes for awarding the areas for exploration I searched for gas and oil and I should mention that this continues to be a public policy of the government.
Or will it depend on the ministry of mines, and energy and whoever is the head or the leader of the industry and also their analysis.
Exercises.
As to the implications of this are in.
In the microeconomic aspect and also with the participation of the Ministry of Finance and public credit Fund.
And we have been doing is very rigorously is to participate and technical groups with representatives of these entities.
In order to show them, what we have.
In respect of contracts.
Four.
To undertake this search.
And we have been making some announcements that there are small but important and then deadline. We will continue working with a corporate role with the contract that are enforced and arguably.
Oh.
February the institution allergy as do the microeconomic relevance all of them are availability or not all of those new contracts.
Thank you Ricardo.
Yes.
Thank you to you all for your answers Katherine Ortiz from corporate or does that maybe under Mr. <unk> you may ask.
Good morning to you can you hear me.
Yeah.
Good morning.
I have two questions. The first one is related.
Two European then with respect to the mentions of the precedence of Colombia.
Another corporate.
Yes, I am in Spanish.
Okay.
Okay now you can add.
Thank you well good morning to you all I have two questions. The first one is related.
And then made by depressed and the Columbia, where the snacks.
To the right and again their rollover corporate role in terms of yeah.
And and conventional project he managed to they didn't like that.
In this regard I would like to understand if for example, like a pit bull well try to project at this regard that had been a bond.
My other companies because of the difficult itself, making them viable due to their child with a community or what is the plan and all of that rolls that theyre going with it has managed to critical patrol.
In the development of this project in this area or other areas.
And my second question is related to the fact that Bruce Lee.
We became aware of a document that shows the guideline of their road map for energy transition and is that document.
There is even a possibility that very soon we will.
We will be having blue import gas that's called bread with their current it once and when you take all of the estimated reserves there are quite different.
If you compare them with a lot of corporate raw had shown in their 2020 plan. So I will like to know what is Europe , India with respect to those figures on what is the alignment.
If they have with the expectations of Ecopetrol and if you could tell us there.
Is there have been any changes to this expectation with respect to the plan that we knew with respect to Ecopetrol strategy. Thank you.
Thank you Katherine and welcome to this conference.
In the context of a possibility.
Of Ecopetrol.
Becoming an important actors.
In the development of power generation.
From unconventional sources.
Nonrenewable energy we cannot ignore.
Particularly the great potential.
Extent in this region Oh.
Energy is wind and solar radiation.
Those potentialities are determined.
And they also constitutes one of the plans of Ecopetrol in there's a 22000 2040 roadmap.
And so far and based on this energy resources.
It is possible to think about that development.
Energy in the transition that we have already mentioned.
As green hydrogen and methanol.
So in this road map, we are foreseeing investment.
And potential for development.
And we cannot ignore them and they will be part of that cross cutting axis, where economic decisions at ecopetrol.
With this goal has got capital discipline each of these opportunities.
Will be developed this and they are defined and studied thoroughly there regrows manner.
As part of the premises and tenants that have been planned and disseminated about this discipline.
The timing and the opportunity it is for decisions on such investments.
The part obviously of that roadmap in that portfolio.
That we are suppose to S and also considering that.
Not only as to the expectations of the God forbid, but also with respect to the existence of new conditions.
In the legal platform.
Derived from the zero because she didn't know some articles.
That prohibited the vertical integration of the energy business.
Companies, such as Isa and Sakhalin.
Indeed, our issuance of.
Emergency degrees were.
By the regulatory and legal spaces being opened for ecopetrol to be able to make investments in generation of renewable and conventional energy sources with respect to your second question I would like to pass the floor to J B.
But mentioning.
Or that this is a draft document.
For comments and observations have been and its stakeholders.
We have been participating in it and conducting our analysis.
So I pass the floor now to Jamie.
Thank you Mr. President. Thank you Catherine for your question the Ministry of mines and energy policies recently this draft of the roadmap for energy transition.
There's some very interesting diagnosis of the government is trying to do on part of 2023.
Titles that have been conducted throughout the Columbian territory with benchmark. Thanks to the multilateral support we have received from different governments worldwide.
This concludes their analysis of scenarios that a president roles that will have comments until August 16, before going specifically into the natural gas the I V.
Like this year that the diagnosis highlights several points, where we have full alignment between the government's vision and a strategy of ecopetrol in three areas. The first one the relevancy of their renewable and conventional energy sources and they import.
The card free that we continue on the road of developing this type of energy second well.
Of course, we are a line the document says as to their relevance of natural gas.
And its fundamental role in the energy transition and I will talk further about that and finally their document recognize it's something that is very important and that is the importance of this transition be a gradual process having.
Having said that with respect to gas I will go back to something we've mentioned in previous calls.
About simplify.
Two or three types of resources that we have in our portfolio reserve that have a very high probability of being developed and produced.
The contingent resources that have more uncertainty and then the prospective resources that have even more uncertain.
When you detailed the scenarios that you mentioned in your question with respect to projections on gas.
In this road map.
Oh, and your transition well effectively all reconsidering their reserve. It is evident that the reserve today are insufficient to have to meet all the demand for gas in the medium and long term that's something that is mine with RFP.
And that that's the conclusion of this road map and corporate draw strategic plant in.
It is essential drug development of their discoveries that we have announced recently.
Blake is then cut email off shore based it because that will enable us to develop the contingent resources the resources to be discovered and prospective resources. In this regard their road map shows that to be able to reverse that situation with Mas.
Continue investing in gas offshore enough you will see the documents they contingent resources that they're covered medicines talking about around 4.2 as the cost is the most likely scenario, which is recognized as well.
See resources in their capital numbers, we are close to 3.9 or Cts saw there's full alignment the golar Grand and pulled some volumes that are from third party producers that are not part of the Ecopetrol group. In addition to this call.
Teaching resources, we have the perspective with sources that as we said in the capital amount two five tcf. So all of this is.
Oh, sorry, Jade and which we all recognize that we need to invest more in that the potential exist primarily in the Caribbean offshore basins and that's why we are conducting such an important activity in this basin.
With that said the country needs to manage this insert.
And the way to do that is through option because.
All of these volumes have.
Sure Joe.
Lenses for development and that's why they're go Manhattan as our work on options to hover. This possible gap that we could have in the short term two options of imported gas as technology, So, Mike, who LNG or using their capacity a regasification.
<unk> that are already existing Columbia are there additional sources. The name of the game is having the optionality to make sure that Colombia will have gas and.
And for our corporate draw to do it in a profitable manner. Thank you Kathryn and I Hope this will help you understand the way we see.
Right now the documents that have been published recently.
Thank you.
Thank you for your answers. The next question comes from Danielle while the other half problems D D.
The floor is yours.
Thank you good morning regarding hi, Matt I have a couple of questions. The first one is about production of unconventional oil considering that without any doubt that type of reservoir. Our production has been one that has you'll have good yields for <unk>.
Paul and I would like to know if you could share with you as well.
What is your expectation of production for the close of the year and what is the Capex that you plan to allocate some of the next two years.
That's my first question, but also I would like to know whether you'll see any risk of interference by the Colombian government.
Two two.
Change this development that's already planned.
Or the production basically the Permian basin.
And my second question has to do with ease.
Recently, there was a shareholders' assembly wears off but if a case of the board of directors were made and I would like to know who you are considering any changes in the management of Isa those are my two questions.
Yeah.
Yeah. Good morning. This is Alberto consuegra them with respect to unconventional production I can say that for them yet.
Continues to be a very profitable asset, where we have all of our bulk within expectation.
Production for the first half.
Half of the year has been very good on the perspective for the rest of the year.
265000 barrels of oil equivalent the good news is that we continue with significant activity and we hope we will end up with 110 drills wells.
Before we already have wealth in Delaware, we already have a decent elect you did a little worried that issue to me is that so this will be about 1200 millions of dollars. This year with the perspective of investment attainment of airport next year.
Pardon me and is a source of a focus for all of our focus and that's we have to say that it's a highly profitable asset with EBITDA margins that exceed 70%.
Yeah.
Yeah.
Danielle with respect to your second question.
Yeah about their risk or interference.
On their businesses.
That are part of Ecopetrol portfolio at present I have just come back from the Permian.
I tend to the board of directors meeting.
Where are we.
Mad with a partner and as I said is one of the more profitable business is topical patrol has in its portfolio.
And the expectation.
About the continuity of the deal.
Well remember this business.
With the partner is stable.
With very good feedback on their outcome so far are cheap.
And obviously there are decisions that are to be made are the time will be in line with what is legally contractually established.
In that partnership for this project.
And regarding your question.
About.
Movements in E sour Andy of the affiliates of vehicle patrol group.
Oh good.
Ed said this isn't as other precedent of Ecopetrol and their board of directors.
And if any decisions are made about changes at.
Oh was the within the rigor.
On the corporate governance.
For example, the very clearly established for such purpose.
Both in the east and that vehicle patrol group.
Yeah.
Yeah.
Thank you the next question.
Question is from Andreas derived therefrom coffee Columbian I'm this is Marty.
Okay.
Okay.
I have two questions.
The first one.
Has to do with gas all store and what has been said.
Regarding there.
Horton.
And the road map.
Yeah.
Or the part that has been published so far.
Is the <unk>.
Last conference call I understood that what you were registering all offshore gas was viable at the current prices in the country.
Not only are they import price bad domestic prices I would like to know what's P. L. Mistake for you to build an infrastructure that is necessary to bring it.
And to register those who serve I would like to understand.
Why does that delay at this time.
Or are those additional considerations and my second question is to.
Awesome.
If you could update give us an update all of the gold.
And objective.
Relative to the solid supply of electricity and hydrogen or hydrogen replacement, that's called Dirty hydrogen for green hydrogen in the industrial processes that you have and that question is related to.
To as far as I know so far.
Your objective.
All of them, having so the supply is so power on hired forget is to replace what you.
<unk> already are using in the hot but I understand now from the breadth of the names that you would like to extend those lives beyond.
The fact of being self sufficient or have cell supply sorry for.
For the length of my question.
Thank you for your question this is Jamie rise.
Where's the offshore gas and then we can review their renewable that you were asking about with respect to offshore.
Yes wins is that the potential that we have in the Caribbean offshore is very part I already mentioned the volume and as you know.
And we have found that according to the estimate this gas can be competitive.
The domestic market pricing the combination of these two factors is hard examples that all project related to this space and with respect to gas are very well ranked four.
Capital allocation to be able to move those resources, which are either contingent or discovered to be limited to reserves. There are two aspects first we need to carry out all the the limitation of work. This is the process that allows us to understand.
That is takes tactically or with no with more certainty the volume that we have image of this opportunity all the other limitation, where it implies really well that building facilities.
We have told you before that he did plenty 'twenty three 'twenty 'twenty pipeline.
We have planned the drilling of seven offshore well.
This will be his passion for these the limitation of the work.
And at this time, we are completing one of the two wells that we have planned for 2023 that means that in some weeks, we will be completing it before the end of the year. We will start the drilling of the second well that is an activity that will continue until a week.
Lead the seven wells of this three year plan and in the second.
<unk> activity is a infrastructure understanding volume.
Where are we going to take that gas to the east.
Close how are we going to trade at on Ross's why does the transport system it'll be connected to and we have found fantastic synergies with the infrastructure that we already have out there.
Still it is helped by yeah, not sure about that somehow are available.
So that will allow us to expedite the work that we are foreseeing infrastructure limitation are crucial.
When we complete those two as we're able to pass is to reserve.
All of this activity of the wells and the infrastructure of course requires environmental licensing processes.
So patient with our communities and other corporate dry we're always committed to doing things well upfront.
So we will do this the call me following processes, but with a clear approach understanding what this means for ecopetrol on product country, and hopefully we're able to pass these volumes to reserve victory.
<unk> 25, I'm kind of trying to sell it and to get them nervous stage told that by the end of the decade, we will have full development of this volume.
With respect to renewables I will go very rapidly on the way we see it.
With respect to hydrogen in 2022 with those a year with an installed capacity of 200 and they make a lot of renewable energy primarily solar 99%. This technology and what we're saying is all high quality plan.
Our next goal is that by the end of the year. We will have 400 Mega Watts, we had enough and in 2025, we will Uh huh.
Around 900 megawatts that will start operating in 2020 six.
Or is this management of the portfolio.
That is contained deals as I told you before this is one of our own projects. We already have 100 on one megawatt big Bill different assets, but we're also working with partners and allies to bring 99 megawatts at that reality.
25 pack a lot for biomass and began to work on that day.
And several projects from small hydraulic plants.
I think we're in the right path to.
The 400 megawatts.
The medium term.
To the extent that we have people are walking and understanding the opportunity of hydrogen political patrol under country. It is evident that renewable and conventional energy will play a fundamental role and that's why we have said that there's 900 megawatts are just the beginning of the story.
Our our hydrogen project that the refiners will work.
The one we are very close to the tax code.
It will red cars.
50 megawatts of Green hydrogen project will require at least one gigawatt.
And for this line Oh God Virgin.
Their needs will be between three and five gigawatt by 2030, and so any party will be about nine or 10 megawatts.
As you can see has a magnitude and figures that is the magic.
The development of a capacity and an architecture is a corporate drove that his position in house.
Okay.
For this type of project.
Well.
Sorry, I interrupt to have clarity.
In those 900 megawatts by 2026, and what you're saying.
And Magnus yourself Giga.
For purposes of hydrogen please clarify.
But point is both K says you are exceeding their requirement of self supply because I think you consume those 900.
Electricity or does it start going beyond the requirements of our corporate draw or I'd region and to go to a phase of being able to explore or to sell.
And with respect to hydrogen also I would like to understand is that installed capacity.
This is beyond what is required for cell supply to power generation, if 100% of that additional installed capacity.
Would be intended for the production of hydrogen or is this sale contemplated for the national system.
Well to go to the point.
The capital we have an installed capacity for self generation of 1300 megawatts, primarily terrible all the figures I'm, giving you a correspond to sell generating projects Nonconventional energy.
<unk> says that will complement the portfolio that we have for self generation when we talk about cell generation as far their hydrocarbons business in the upstream being alert them, but also for our future production of hydrogen out there or is it like green ammonia or green hydrogen all of them.
It's focused on chubb's younger ratio or low ambition.
Supply and part of the hydrocarbons business and our main objective and the medium term of course.
We have I'll do a permanent play the profitability on Competiveness CBD office properties 10, as our President mentioned being out of that framework I think that will have to be reviewed we are poker.
It is sufficiently material to build the facilities that are required to focus that we have.
Test different business cases, which are quite profitable option and the replacement that we have all the sources that are.
Oh C O two episodes intensive with sources that will leave room to reduce that admission with poor friendly serves as our main focus.
Yeah.
Yeah.
Yeah.
Yeah.
The next question has come through.
No more than 90.
From Morgan Stanley .
Okay.
Yeah.
Good afternoon. Good morning, Thanks for taking my questions I have two questions here.
Can you talk a little bit about our trends in oil production for the second half of the year, maybe address where you see upside risks and downside risks while the main challenges are for you to finish the year. According to.
Could the guidance a bit more.
Recent guidance provided please.
And then the second question, it's very interesting to see you're making a lot of advances on hydrogen.
Actual operations, but can you give us.
Some clarity or color on the level of returns are you currently see on hydrogen operations are the expected returns and how do they compare with the returns you are able to do on the hydrocarbon business. Thank you very much.
Yeah.
Good morning. Thank you for your first question I will answer the one related to production. My name is Alberto Consuegra that and I will like to tell you that we maintain our production forecast the range that we have been giving you and by the end of the year will be between 700.
Or in 'twenty, and 225000 barrels hopefully clear to the upper range.
Are we in the first half.
I have had that material limitation of raise related to the environment. This trend could continue in the second half, but we will have scheduled maintenance in some of the production fields. This will not be substantial but we must consider the impact of the plan.
This is to tell you that we continue with the first bag they've all finished.
Finishing out in accordance with what we have planned the third.
Third quarter looks quite robust with respect to production, but as I said there are factors.
That perhaps will not help us talk to us that the schedule shutdowns for maintenance and the environmental issues that continued to materialize. Thank you.
Yeah.
Bruno Thank you for your question with respect to opportunities that we are managing the hydrogel portfolio I will like to share that we are focusing on those that enable us to have some legs that are more sophisticated isn't though.
Well, Jay and I have synergy with the hydrocarbons business that is the.
What is allowing us to reach profitability at rates that are appealing and that means that they could exceed two digits.
Oh, the GP dollars.
Most evident example that we have is the two projects that we have out there refineries of Cartagena refinery as I have shared before in this case to give you. The example, I would do is to build a possibility to produce green hydrogen.
Based on our nonconventional renewable source hydro.
Is used primarily for processes that all or hybrid treatment.
The refineries the Australia, you'll see fields, such as diesel and gasoline directly and have no sulfur, but also can what do you see more sophisticated product.
Concretely Green methanol in Colombia.
We are net importers of methanol.
It is used in the industry processes and with think that this could be replaced with a local product.
But also with a product that it is less steel to intensive when we combine all these pieces in.
The business case, we are racing in fact, a tier that is competitive the middle and long term challenge for Ecopetrol and for all the companies that are working with.
Why green Blue high worldwide to be able to have those profitability rates big though.
Characteristic of the project.
And then probably it will be focusing on.
Hydrogen for hydrocarbons and not for new markets. We are working on this every day, but we know this is a technological project.
Or what should we are committed to and it is facing challenges that are not minor but of course, we are working hard on that.
Because the capital discipline now their profitability parameters are.
A very important for us and we will continue doing so.
And as far as the opportunities in stock to make sure I Hope this is clarifying your concern.
Jamie I would like to add to give you a group perspective I think James.
Answer is absolutely clear, we're looking for a competitive returns two digit return.
And we are following all of the criteria of capital discipline that for which we are known.
This should be also seen where they know more.
Abroad or context, if you look at the allocation of capital 70% of the company's capital.
Is directed to the hydrocarbons business line for us.
Dippers had two transmission Roes.
So we're talking about 10% allocation first.
Hey, good.
As part of that 10% is our business line of low ambition.
This is the predominant component is gas as to capital allocation. It will continue to be gas at the short and medium term.
So.
What we are talking about is all plans that in the context of the total allocation of capital.
Our mess shared calculate did okay.
Calibrated to where we want to understand and make those business models are viable.
I understand its long term profitability.
Second.
I would like to mention.
That comparison with the hydrocarbons business.
Because as you very well know the hydrocarbons business and its profitability is higher than the linked to the price cycle.
One thing is when we are in the good times of prosperity and it's different than when we Oh, well, let's say that and as history has shown nobody can anticipate.
Chad.
Entirely and why do we have no debt historically is that there is great volatility.
So for us in the context of hydrocarbons, having return and you know that we always look for sustainable returns overtime.
Oh about 10%, that's what we're looking for and in that line.
We'll see.
But the low emission businesses can be competitive with those return this could be favorable.
With less volatility.
I'll have to see.
How old is he a ball and then we have the regulatory conditions market conditions execution environment that.
That will enable those returns to become real that's the way we see with this topic.
Third.
The structure all the capital that a company is the project while in the hydrocarbons business.
Even as long story and that there are all these chains are quite mature and well established.
The general pattern of the capital structure is that the comp in the country with this cash flow, 100% in many of the project.
And in this low emissions businesses.
We see other scheme.
Our partnerships are protagonist.
The project Finance is all so proud of Ghani is part of the structure of the project for several reasons first because given the maturity of conditions of those value chain, we need those alliances for markets to materialize.
Second and also because of the risk.
Risk capital ratio, we are riding that risk capital and financial institutions that are willing to offer.
Financial conditions that are more competitive than in the competitive area to give you. An example of why the capital calls of our hydrocarbons business, depending on the company of course could be.
Those two eight and 12% depending on the player.
He lives businesses, it could be as low as 4% or seven or 8%.
So really the issue here is to understand they were able to generate profitability for the shareholders.
That that differential of the profitability and the capital costs.
It's something that we have seen so far to the extent that those projects are sanctioned.
We will be able to confirm that all the proposals that the way we're approaching it. Thank you.
Perfect. Thank you.
Yeah.
Thank you for your answers. The next question comes from Doug So cost competitive from UBS you can ask now.
Hi, everyone. Thanks for taking my questions. My first question historically, the company has been a solid dividend player but.
In 2023 on the lower Brent environment higher Capex and also income tax from the country and we do a drop in the capital location flexibility for the company. It would be great to hear companies view in terms of capital location ahead, if you'll see dividend payments to be closer to the bottom or there is a high range between the fall.
The 6% policy and maybe breaking between New York expectations for this year 2023, but also looking the mid to long term considering investments in the strategic plan and also oil and fuel prices environment. My second question the best.
Moms, who we have seen some discussions in the country to potentially change fuel crisis calculation.
And fuel prices has actually been increasing gradually in the past months right.
So it would be great to hear on how discussions with the government have been going on this front and your thoughts on fuel prices ahead, how much gas you still see to international prices and how much and what.
What timing these gaps these gap could eventually be adjusted so those are my questions. Thank you.
I will take both questions first of all in relation with the Capex.
As you have observed the campuses is being well executed we are fully in line with the expectations. So far.
And to that extent, we hope to finish the year within the ranges.
Then we have mentioned to the market before which is a rate that is in the order of.
Five $8 million to $6.5 million.
The distribution or allocation of that Capex as I mentioned before.
In line with their training 40 strategy.
Well it is an important bulk will save the hydrocarbons business of about 70% transmission and rose 20%.
Low emissions the rest.
So we are not expecting surprises.
And it shows the commitment of the company to its growth right.
And with respect to the second question that has to do with setback.
If I understood correctly about prices.
The government has opted for a commitment.
Making an adjustment.
The fuel prices of domestic steel prices and it has been executing it consistently in a committed manner.
Thanks to that you have been able to see that change in the trend of accumulation of pet pig.
We as the government has announced we hope those internal price adjustments will continue.
And this is not only for the end of the year, but also for 'twenty 'twenty four.
The goal of the National Guard was just to have domestic rises are aligned with international prices by the end of 'twenty 'twenty four.
Is the plan that has been announced and the route.
That we're using.
As a planet brands. Thank you.
Okay.
Yeah.
The next question is from the cats from.
Goldman Sachs, yes above their accounts payable all pet bed resolution 16, 12 reverse all lead to the balances are perfect for the second quarter of 2022, and what is the expectation of the company to receive the remaining balance of pet Tech.
Hi, Josh Thank you for your question.
With respect to pare back as you saw in their financial disclosures their balance of that back.
This semester was 31 million pencils.
And the second water there was enough to I think corresponding to last year.
What we see from now on.
Is that those compensation will continue to be core to Lee.
At least that's what we have seen so far.
The idea to have conversations.
So that the.
The balances will not accumulate a bath 12 months, but at the same time that the conversations will not be premature. So I have to have a margin for maneuver eating out is also further government to see how the prices of all.
As well as the adjustment.
With tank.
That is a viable mechanism.
The fiscal framework in the middle medium term is giving us visibility on how the garment theme.
Theater read to offset balances from now on.
We have a public document that shows what is the balance that they go over and expect for the end of the year and also how it plans to offset that next year and that's the premise of the planning.
So if you look at it from a historical perspective, the level of uncertainty with respect to the recognition of pare back a call.
And the evolution of the balance.
Has decreased dramatically.
This year and with Didi or Pat.
So that by the end of next year.
The dish Bell and they pulled back a college should be mainly about that's what we are seeing and I hope that has.
Answered your question.
The next question is also from the chat at Langley co chair for a blood binding visits.
Capital allows yesterday that it has redeemed $872000 in bonds.
How did though.
Company finds a redemption of those bonds I want all of their funding plans. That's the Coca Cola have for the rest of the year.
Yeah.
And then thank you for your question.
And the operation that we announced yesterday is an appendix all of the operations that we carried out a month ago associated to the board.
That was issued the idea was to issue that bond, which was one $5 billion in order to refine the existing debt.
Their resources toward this redemption.
Sure.
March partially what we call leg did a month ago with a $1 5 billion.
It's all of the situations.
As I said in my presentation.
It leaves us with a challenge of refinancing for the year. So all of the short term.
Deadlines or exploration have already been resolved.
We refinanced them.
Medium and long term from two five years all of us to 10. Another seven years, so that gives us the debt profile that makes them feel more comfortable.
It gives us more financial flexibility from now.
So the focus plan or the rest of the year.
Is trying to do next year.
We will have a powerful maturities next year about $1.5 billion, we will be monitoring market conditions.
So I understand if it makes sense to activate.
The refinancing that's why not all the same.
And also the ordinary course of their business always computers.
Operations to maintain our working capital.
That's what we are anticipating thinking.
Thank you for your answer the next questions come from the chat about.
The escalade as well that is the vision and strategy for gasoline diesel and natural gas according to the demand behavior in Colombia.
Alberto Good morning. Thank you for your question I will answer while there are no off from the rough finding an industry processes Vice presidency, I would say that it should be mentioned that incorporate for all.
And that's really a relevant role for the supply of clean fuels to the country. It is worth mentioning that in diesel the country's self sufficient and we even have a balances that are exported from the Cartagena refinery and.
And we have international.
Quality.
Jet fuel we are also self sufficient and have balances for exports and this is Don from cut that had a refinery and.
We're talking about a normal operational with all of our plants in operation.
Times, but relatively we have you have shutdowns in or I have pets at perrigo.
For God send you that sounds that production can go down by that large.
I have surplus in diesel and jet.
When talking about gasoline it should be mentioned and you remember that by 2013 the demand was.
50, or 65000 barrels per day I need was.
Supplied with National production, However is 14.
We have seen a de growth of demand for gasoline in the country.
And racing well is awful hard were down 40, or 50000 barrels per day, so gasoline demand has doubled.
Well the metric in the past 10 years, although in a corporate role yeah could be increasing our production.
The Cartagena refinery started operations in 2016 or 17, increasing their production fields, including gasoline our current production.
Is between 80090 thousand barrels per day for both refineries so for these demand levels.
We will supply the market, we do see imports of gasoline of about 60000 barrels per day with Gerald somebody's by a corporate role let his shirt meeting the market demand.
And to the extent that the man is maintained its level.
Our per dogs Jan will be so staying about 90000 barrels per day.
So we will have to meet that demand through imports we have relevant projects at both refineries.
And call it a man I've got a hand up here.
Or to what is sure that we will continue improving the quality of that gasoline.
Nevertheless, lowering the sulfur levels, we want to get to be less than 10 parts per million and also to improve the octane.
And this is being executed from now to put 2030 to read the domestic regulations.
That is already issued and in fact, they've asked us and has been now.
Your quality.
In general in 2023, we have had a reduction in the level of OPEC imports of both diesel and gasoline.
And I would like to mention that last year in September we started there.
Expansion of the Cartagena refinery.
And we were able to add 6000 barrels of additional gasoline production.
Where do you think the board level.
And to the extent that the man is maintained at these levels of 140, Iran.
<unk> barrels per day, the importance of gas and will continue to be necessary to meet the demand the country as part of her stride in Tri Party.
Or not we'll see.
Bard, Inc. Ruiz increases the refining capacity in Colombia.
Thank you.
Well, we yes.
Have a good finish to our time Mr. President you can convey your final message now.
Yeah.
Well, thank you to all the participants.
Executive and director Silver copper told the team I would like to reiterate our willingness to continue with our road map at narrow reimbursement for all of you.
For the.
Medium and long term strategy.
Good day. Thank you. This is the and all of our results conference for the second quarter of 2023.
And for your participation you can disconnect now.
[music].
Yes.
[music].