Transportadora de Gas del Sur S.A.(TGS) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Net income for Q3 2023 was ARS4.9 billion, a significant decline from ARS11.4 billion in Q3 2022, primarily due to a ARS5.7 billion negative variation in financial results and a ARS4 billion decrease in liquids EBITDA [5] - Liquids EBITDA decreased by 31% to ARS9 billion in Q3 2023, compared to ARS13 billion in Q3 2022, driven by a 30% decline in LPG prices [6] - Natural gas transportation EBITDA decreased slightly by ARS1 million, impacted by a ARS10.1 billion negative inflation effect on revenues, partially offset by a ARS7.3 billion increase from a 95% transitional tariff hike [17] - Other services EBITDA increased by 46% to ARS10.8 billion, driven by higher natural gas transportation and conditioning volumes [19] - Cash position increased slightly to ARS210.3 billion (approximately $600 million), with 73$300 million, to increase total capacity to 28 million cubic meters per day by 2024 [14] - The company expects to benefit from the commissioning of the Néstor Kirchner pipeline and the construction of its second tranche, providing growth opportunities in midstream services [15] Management Commentary on Operating Environment and Outlook - The company faces challenges due to inflation and foreign exchange restrictions, requiring offshore financing for imports [10][44] - Management expects the license extension to be granted in 2024, which is crucial for strategic planning and business expansion [4][11] - The company anticipates midstream services to become the largest EBITDA contributor by 2026, depending on tariff renegotiations [46] Other Important Information - CapEx for the period amounted to ARS19.8 billion, with loans of ARS11.6 billion and a working capital increase of ARS11.2 billion [9] - Financial results recorded a negative variation of ARS5.7 billion, mainly due to foreign exchange losses and inflation exposure, partially offset by financial asset income [29] Q&A Session Summary Question: What are the CapEx expectations for 2023 and 2024? - The company is taking offshore financing for imports due to restrictions on the official exchange market, with loans expected to be paid next year [10] Question: What is the status of the license extension request? - The company expects the license extension to be granted in 2024, which is critical for business expansion and strategic planning [4][11] Question: What are the reasons for the decline in propane export volumes? - The decline is attributed to seasonality, with expectations of compensation in Q4 2023 [31] Question: What are the expectations for midstream services growth in Vaca Muerta? - The company expects to increase volumes from 15 million to 28 million cubic meters per day by mid-2024, with expansions expected to be operational by May and July/August [36] Question: What are the implications of the license extension for the company? - The extension is crucial for both regulated and non-regulated businesses, with significant implications for strategic planning [33] Question: What are the plans for LNG and LPG projects? - The company is currently studying LNG projects and expects to make a decision in the second half of 2024 [35][38] Question: What are the expectations for natural gas transportation tariff revisions? - The company is in talks with ENARGAS for a transitional adjustment and expects the tariff revision process to take at least six months [40] Question: What are the FX restrictions impacting the company? - The company faces restrictions on accessing the official exchange rate for purchasing goods and services, relying on loans for imports [44] Question: When will midstream services become the largest EBITDA contributor? - Midstream services are expected to become the largest EBITDA contributor by 2026, depending on tariff renegotiations [46] Question: What are the benefits of the Techint North pipeline reversal? - The company expects annual revenues of approximately $150 million from the pipeline reversal [54]