Ecopetrol(US:EC)2023-05-15 18:32Financial Data and Key Metrics Changes - The refining cash cost indicator was $3.69 per barrel, a decrease of 18% compared to 1Q 2022, primarily due to exchange rate effects [1] - Total unit cost decreased by 7.4% compared to the same period last year [1] - EBITDA margin was 45.9%, driven by strong operating performance and solid product realization prices, which offset increased operating costs [3] - Revenues for the first quarter reached COP 38.9 trillion, with EBITDA of COP 17.8 trillion and net income of COP 5.7 trillion [74] Business Line Data and Key Metrics Changes - The Transmission and Toll Roads business contributed 10% to group revenues, 15% to EBITDA, and 4% to net income [2] - The gas and LPG business recorded an EBITDA margin of 59% in the quarter, with production reaching over 160,000 equivalent barrels per day [97] - The refining segment achieved an EBITDA of COP 3.2 trillion, with a gross margin of $24.6 per barrel [111] Market Data and Key Metrics Changes - The company expects to maintain a crude production rate of 719,000 barrels of oil equivalent per day, despite security issues impacting production [105] - The net income breakeven closed at $32 per barrel, influenced by higher sales volumes and better product spreads [116] Company Strategy and Development Direction - The company is focused on the 2040 Strategy, emphasizing growth in the hydrocarbon business while monitoring market conditions for necessary adjustments [9] - The Corporate Vice Presidency of Finance has been transformed to support sustainable growth in the energy transition, ensuring capital discipline and cost efficiency [6] - The company aims to reduce methane emissions by 45% by 2025 and 55% by 2030, aligning with its net-zero aspirations [5][88] Management's Comments on Operating Environment and Future Outlook - The global economic environment for 2023 is challenging, with low growth expectations and inflationary pressures [75] - Management expressed confidence in achieving a strong operational performance for the remainder of 2023, despite declining global refining margins [65] - The company is actively discussing with the government to ensure a competitive compensation framework for producers [39] Other Important Information - The investment plan for sustainable development in 2023 amounts to COP 773 billion, a 25% increase from 2022 [77] - The company has made significant progress in social investment, benefiting 31,000 students through educational programs [77] - The company is advancing in hydrogen production, with projects expected to produce 1 million tons per year by 2030 [62] Q&A Session Summary Question: What are your expectations for your refining business for the remainder of 2023, given declining global refining margins? - The company expects refining margins to remain strong between $15 per barrel, despite a decline from previous highs [65] Question: What oil price assumption are you using for the annual budget? - The company is using an assumption of $81 per barrel for the annual budget and has no plans to change this number for 2023 [51] Question: What is the required average local gas price for offshore gas reserves to become economically viable? - The company considers its offshore resources competitive compared to other domestic sources and import gas [36] Question: What is the expectation for hydrogen production in the next couple of years? - Current hydrogen production is about 130,000 tonnes per year, with plans to increase capacity significantly by 2026 [38][62] Question: What is the expectation for reserves addition coming from enhanced oil recovery (EOR)? - EOR is expected to represent 40% of the production base and reserve replacement portfolio in the coming years [63]