Ecopetrol(EC) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In the first nine months of 2022, the company achieved a net income of COP 26.6 trillion and an EBITDA of COP 59.2 trillion, with an EBITDA margin of 50% [7] - The net income for the first nine months is 59% higher than the entire net income for 2021 and 150% higher than the same period last year [7] - EBITDA per barrel of the hydrocarbons business increased to $67.3 per barrel, up $27.1 per barrel compared to the first nine months of 2021 [50] Business Line Data and Key Metrics Changes - Average production in Q3 2022 was 720,000 barrels of oil equivalent per day, with an average of 706,000 barrels per day for the year to date [9] - The downstream segment registered a combined refining gross margin of $20.3 per barrel and an EBITDA of COP 2.2 trillion [41] - The Cartagena refinery accounted for 36% of the downstream segment's EBITDA during the quarter and 41% year-to-date [41] Market Data and Key Metrics Changes - In the Permian Basin, average production reached 43,800 barrels of oil equivalent per day, a 79.2% increase compared to the same period in 2021 [35] - The midstream segment transported volume increased by 63,000 barrels per day compared to Q3 2021, reaching an all-time high for product pipeline transport exceeding 300,000 barrels per day [37] Company Strategy and Development Direction - The company continues to focus on its 2040 strategy, promoting renewable and low-emission energies while exploring and exploiting oil and gas [69] - The new Board of Directors supports the continuity of the 2040 strategy, emphasizing the need to adapt to industry challenges and generate value for stakeholders [69] - The company is committed to decarbonization and has made significant progress in its TESG strategy, including a reduction of 229,317 tons of CO2 equivalent so far in the year [12] Management's Comments on Operating Environment and Future Outlook - The company acknowledges challenges from the domestic and international macroeconomic situation, including inflationary pressures and increased raw material prices [45] - Management expects a strong comeback in production for Q4 2022 after planned maintenance, with a target range of 720,000 to 725,000 barrels per day for 2023 [78] - The company remains optimistic about the price environment for commodities in the near term, which will influence cash flows and tax implications [85] Other Important Information - The company has captured efficiencies of approximately COP 1.8 trillion to mitigate inflationary impacts, with COP 0.6 trillion helping to contain cost increases [46] - The cash position at the end of Q3 2022 was COP 15.9 trillion, with operating cash flow generation of COP 14.9 trillion [60] - The company has a robust exploration portfolio with an estimated potential of 17 TCF of gas identified in 46 discoveries under evaluation [31] Q&A Session Summary Question: Production and Tax Concerns - A question was raised about production guidance and potential declines in Q4, with management indicating a planned maintenance impact but expecting a strong recovery [76] - Concerns about new incremental taxes were discussed, with management explaining the tax reform's structure and its potential impact on cash flow [79][82] Question: Refinancing and FEPC Balance - Inquiry about refinancing options for 2023 and the status of the FEPC balance was addressed, with management confirming a focus on bank loans and projecting a year-end balance of COP 29 trillion to COP 32 trillion for FEPC [88][90] Question: Tax Reform and Contract Renewals - Questions regarding the impact of tax reform on royalties and duty-free zones were answered, with management clarifying that the current version of the reform maintains the tax status of existing duty-free zones [95][100] - The potential for reactivating suspended contracts was discussed, with management indicating that existing contracts will be honored and new contracts are being evaluated [101]