Transportadora de Gas del Sur S.A.(TGS) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of ARS 4.4 billion in Q3 2021, a significant increase from almost ARS 600 million in Q3 2020 [9] - Total EBITDA decreased by ARS 3.1 billion, primarily due to a decline in natural gas transportation EBITDA by ARS 2.6 billion and a decrease in liquids business EBITDA by around ARS 900 million [9][10] - Financial results showed a positive variation of ARS 7 billion, which offset the total EBITDA decline, mainly due to lower foreign exchange rate losses compared to Q3 2020 [10][17] Business Line Data and Key Metrics Changes - EBITDA from the natural gas transportation business decreased by ARS 2.6 billion, attributed to the lack of tariff adjustments since 2019 [11] - Liquids business EBITDA fell from ARS 4 billion to ARS 3.1 billion, influenced by increased natural gas costs and lower sales volumes [13][14] - EBITDA from other services increased by 37%, mainly due to higher revenues from midstream services [15] Market Data and Key Metrics Changes - The average natural gas cost increased from $2.2 to $4 per million BTU, contributing to the decline in EBITDA [14] - The company experienced a decline in liquid sales volume from 66,000 metric tons to 8,000 metric tons, impacting overall revenues [14] Company Strategy and Development Direction - The company is focused on expanding its infrastructure and closing new agreements with gas producers, driven by increased natural gas production in Vaca Muerta [4] - An open season was launched to assign almost 100% of the capacity in new firm capacity contracts with an average term of 20 years [6] - The company plans to continue generating positive free cash flow despite the deterioration of operating margins [20] Management's Comments on Operating Environment and Future Outlook - Management expects international natural gas prices to remain high in the upcoming quarters, although predicting exact prices is challenging [23] - The expansion of the international transportation system is under analysis by the national government, which could positively impact operations [24][25] - Management indicated that normalized transportation margins may not be achieved until 2023 due to high inflation and ongoing tariff reviews [30] Other Important Information - The company maintained a stable cash position of around ARS 33 billion, equivalent to over $330 million, with no debt amortization until 2025 [20] - CapEx for the quarter amounted to ARS 2.2 billion, reflecting ongoing investments in infrastructure [20] Q&A Session Summary Question: Will natural gasoline prices sustain in the fourth quarter and into 2022? - Management expects international prices to remain high based on market futures, but exact predictions are difficult [23] Question: What is the potential impact of the expansion of the international transportation system? - The expansion is under analysis and is expected to positively impact the company's ability to evacuate gas [24][25] Question: Will the transitional tariff scheme allow for full margin recovery? - Management indicated that predicting the normalization of transportation margins is difficult, with potential adjustments not expected until 2023 [30] Question: What caused the increase in OpEx compared to 2020? - The increase in OpEx is attributed to the pandemic's impact on maintenance capabilities, leading to higher operational costs [31] Question: Can you discuss the shortage of gas for processing in Q3 2021? - The shortage was anticipated due to seasonal demand, and management is addressing this through planned replacements [32] Question: What is the status of the transitional adjustment process? - Management cannot predict the next adjustment but indicated it would likely be below general inflation [33]