Ecopetrol S.A. (ECOPETROL) Earnings Call Transcript & Summary

Good morning. My name is Natalia, and I will be your operator today. Welcome to Ecopetrol's earnings conference call, in which we will discuss the main financial and operational results for the third quarter of 2023. [Operator Instructions]. Before we begin, it is important to mention that the comments in this call by Ecopetrol's 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 account risks or uncertainties that could materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared in this conference call. The call will be led by Mr. Ricardo Roa, CEO of Ecopetrol; Milena López, CFO; Alberto Consuegra, COO; and David Riaño, Vice President of Low Emission Solutions. Thank you for your attention. Mr. Roa, you may begin your conference.

Good morning, everyone, and welcome to Ecopetrol's Third quarter 2023 results presentation. Before we begin today, please allow me introduce some of the new members of Ecopetrol's management team. First in the vice presidency of finance and sustainable value, we welcome Milena López who has been the CFO of CENIT, a transportation company of the Ecopetrol Group for the past 5 years. Milena has held senior roles, including General Director of Public Credit and National Treasury at the Ministry of Finance and Public Credit and various positions at JPMorgan. In the Vice President of Low Emission Solutions we welcome David Riaño. David has more than 28 years of experience in the energy sector and has held positions in various companies in the energy market such as Transportadora de Gas Internacional, TGI, Empresa de Energía de Cundinamarca, Gas Natural Fenosa, Red de Energía del Perú, [ Penyal ] ISA and government entities making him a key leader to drive our low emission solution business line and advance the energy transition in a responsible and profitable manner. I thank David, Milena and the other senior managers for their commitment to bring new knowledge and experience. I would like to take this opportunity to thank else of our employees because it is you who make these results possible. Let's move on to the next slide, please. I want to start by highlighting the excellent operating performance achieved during the quarter. We achieved an average of 741,000 barrels of oil equivalent per day. A figure we had not seen since the last quarter of 2015. And volume transport and cargoes higher than the same quarter of the previous year. This proves our commitment to the company's core business. Besides investment [ loans ], we have achieved significant milestones that we wish to highlight. In early October, we confirmed the presence of natural gas in deep waters in the South Caribbean of Colombia in the Glaucus-1. The importance of the gas province in the region and our active exploration portfolio. This achievement joins a major exploration campaign with 10 wells declared successful so far in 2023. Our accounts receivable from the fuel price stabilization fund continued to decrease COP 16.4 trillion, offset by dividends to the nation so far this year, a cash payment of COP 1.9 trillion and the smallest difference between the port parity gas line price and the local price highlighting Ecopetrol's success management and the nation's commitment. This has resulted in a 54% lower accumulation than in the same period last year. Also, I want to emphasize the commemoration of our 15 years on the New York Stock Exchange with an Investor Day reaffirming our strategy for 2040 energy that transports. We highlight the launch of operations of our new trading subsidiary, Ecopetrol US Trading in Houston, Texas, in October, the commercial and operating strategy to strengthening and enhancing relationships with our clients through a local support team for fluent communication with consumers and suppliers and providing firsthand access to market information. Additionally, on the commercial front, we emphasize the performance of our subsidiary, Ecopetrol Trading Asia, which has managed to market more than 100 million barrels of crude oil in the Asian market today and strengthen the strategy of diversifying customers and countries, reaching new destinations as Malaysia, Thailand and Japan. Finally, up to the end of the quarter, we have made transfers to the nation of more than COP 45 trillion through taxes, royalties and dividends reaffirming our commitment to the country's development. Let's move on the next slide, please. Year-to-date, up to the third quarter, we have recurred revenues of COP 108 trillion, an EBITDA of COP 48.5 trillion and a net profit of COP 15 trillion all aligned with our 2023 financial plan and achieving efficiencies of COP 2.9 trillion. We look optimistically to over the coming points, although we will face challenges preparation for the phenomenal [indiscernible] and in response to potential additional requirements for [ really use ] to support [ contel electricity ] generation. The operation and supply chain has prepared itself by building inventories in coordination with the Ministry Mines and Energy. Oil sales and generators priorities given to the available volume of sales diesel from the Cartagena refinery to match the potential needs of thermal power plants. Additionally, logistical operations have been planned to ensure the supply of the additional required fuel and supply contracts for diesel to wholesale distributors for -- plant operations have been structured. Similarly, all contingency operational scenarios in the areas of production, transportation, refining and marketing guarantying, the country's normal supply, supported by our operation excellence and commitment to the energy transition. Thank you, everyone, for being part of this journey and for your continuous support of Ecopetrol. Let me invite Milena Lopez for key financial and management figures.

Thank you, Ricardo. It is in honor to address you on my first earnings call as CFO of the Ecopetrol Group. I am deeply grateful for the opportunity to join the Ecopetrol team and I want to take the opportunity to assess that our financial successes of the company results from the collective effort, which I look forward to being a part of as I'm committed to further strengthening our market position and generating value for all our stakeholders. Ecopetrol Group's organic investments amounted to COP 19.2 trillion year-to-date. The highest quarterly figure in the past 7 years, representing 20% year-on-year growth versus September 2022 and in line with investment guidance for 2023. The Hydrocarbon business line closed the third quarter with executed investments totaling COP 13.3 trillion. Representing approximately 70% of the group's total. These resources were mainly allocated to drilling and to upstream completion activities in the Rubiales, Caño Sur, Castilla, Chichimene and Floreña fuels. Along with exploration activities in the Llanos, Piedemonte and Lower Magdalena Valley. International investments for the quarter concentrated on developed activities in the Permian Basin. In the Low Emission Solutions business line, the enabler of our energy transition investments resources totaling COP 2.4 trillion were invested, including 2 trillion allocated to natural gas projects in assets, primarily located in the Piedemonte region and exploratory blocks, mainly offshore. Additionally, investments in the transmission and toll road businesses amounted to COP 3.5 trillion and corresponded to the projects executed by ISA in energy transmission, toll roads and telecommunications. These investments allowed for advances in the construction of the electric transmission lines and improvements aimed at increasing the reliability of the existing network as well as in the toll road projects of Ruta del Loa, Ruta de la Araucaria and Ruta de los Rios, in Chile. At the same time, EBITDA amounted to approximately COP 48 trillion up to September 2023, contributing to the second best financial results in this period in the company's history. The hydrocarbons line of business continues to be the most significant EBITDA contributor as we progress with a gradual diversification of our business lines. The Ecopetrol group continues to implement its comprehensive strategy for energy efficiency and competitiveness. As of September 2023, we have achieved approximately COP 2.9 trillion in efficiencies through initiatives that have reduced costs and expenses, increased revenues and optimized investments. Please continue to the next slide. As of September 2023, the company's consolidated cash balance was COP 14.1 trillion with business operations as the primary source of cash generation. Main cash outflows that stand out were CapEx disbursements and dividend payments to minority shareholders. Additionally, during the period, COP 16.4 trillion of the CapEx accounts receivable have been offset against the payment of dividends due to the Republic of Colombia. As of September 2023, there is a notable decrease in the accumulation of the fuel price stabilization fund when compared to 2022. This primarily due to ongoing increases in gasoline prices throughout the country. During the third quarter, COP 8 trillion of OpEx receivables were offset against the payment of dividends payable to the Republic of Colombia and a COP 1.9 trillion payment was received in cash, resulting in a FEPC accounts receivable balance of COP 25.7 trillion at the end of the quarter. Furthermore, it is worth noting that thanks to the refinancing efforts undertaken throughout the year, the gross debt to EBITDA indicator at the end of the third quarter was 1.7x. At the same time, debt maturities for 2023 have been fully refinanced, and we continue progress in refinancing the 2024 maturities. With this, we continue to maintain a gross debt-to-EBITDA ratio below the 2.5x long-term level. I want to highlight that rating agencies have maintained the Ecopetrol's rating corroborating the company's solid financial profile, excellent operating performance across all segments and business lines and proven access to the global capital markets. Please continue to the next slide. Our comment to TESG creates value for the company and enables our energy business in the long run. With regards to the environment, as specifically, in terms of our holistic approach to responsible water management, leading up to the third quarter of this year, we reused 114 million cubic meters of water in our operations, which means that the company avoided the capture and/or discharge of this water volume thus reducing pressure on water resources. This amount equals to 79% of the total water required to operate. The results were achieved, thanks to the implementation of best practices in the reuse and recirculation of water in the Barrancabermeja and Cartagena refineries as well as our production fields. In line with our ambition to achieve net zero emissions by 2050 as of the third quarter of this year, and using 2020 as our benchmark, we achieved a cumulative greenhouse gas emissions reduction of 1.33 million tons of CO2 equivalent in our direct emissions, Scope 1 and 2, mainly in the upstream and downstream segments. This result was achieved through initiatives focused on reducing flaring and venting, improving energy efficiency and through the use of renewable energies. With regards to our ambition to generate more renewable energy for self-consumption and to promote the use of cleaner energies, our goal is to incorporate 900 megawatts by 2025. Currently, we have 208 megawatts in operation. We successfully completed the construction of 7 megawatts at the Cartagena solar farm and currently have an additional 94 megawatts under construction. Regarding social development, we highlight the creation of 4,442 non-oil jobs and a TESG-related investment of COP 1.33 trillion by the end of the third quarter, mainly through investments in items just mentioned as well as in energy efficiency, better fuel quality, and investments in biodiversity. By the third quarter of the year, 36% of Ecopetrol's investments were allocated to energy transition initiatives. With 51% of these resources invested in the transmission and toll roads business line, 30% invested in natural gas and 19% allocated to TSG initials. I now give the floor to Alberto Consuegra, who will lead you through our most significant milestones in the hydrocarbons business line.

Thank you, Milena. At the end of the third quarter, the 2023 exploration campaign was 60% complete with a drilling of 15 exploratory wells, one of them located in the Caribbean offshore, 2 in the Piedemonte basin and 2 in Northern Colombia, all with gas potential. Also, 10 wells were drilled in the Llanos Orientales Basin with liquid hydrocarbons potential. In 2023, we achieved 10 exploratory successes of which I would like to highlight the following: Glaucus-1 well located in the Southern Colombian Caribbean in the COL-5 block operated by Shell, in which Ecopetrol has a 50% interest. The Glaucus-1 well confirmed the presence of natural gas in a new accumulation in block COL-5, where the Kronos-1, Purple Angel-1 and Gorgon 2 wells are located. Also, 4 crude oil successes in the Llanos Orientales Basin, 3 operated by GeoPark, partner of our subsidiary, Hocol. Those are Zorzal-1,Saltador-1 and Toritos-1 and the Kimera-1 well operated by Ecopetrol in partnership with Repsol. On the offshore front, we continue the evaluation and appraisal plan for Uchuva-1 discovery which is expected to be executed in 2024. We also expect to start drilling the Orca Norte-1 well operated to Ecopetrol in November of this year. To date, the 2023 exploratory campaign has a success rate of 45%, which is above the industry average. Let's move on to the slide, please. During the third quarter of the year, we achieved a production of 741,000 barrels of oil equivalent per day, an increase of 20,000 barrels of oil equivalent per day compared to the same period of the previous year. These results are driven by the incremental production from Caño Sur, Rubiales and the Permian Basin as well as the solid performance of secondary recovery fields such as Castilla and Chichimene. In particular, I would like to highlight that production via secondary and tertiary recovery technologies contributed around 40% of the Ecopetrol Group's production from 23 assets, including water injection at Chichimene and Castilla fields. We are also maintaining our focus on efficiency. As of September 2023, the upstream segment achieved COP 1.8 trillion in efficiencies accounting for 61% of the Ecopetrol Group total efficiencies. Thanks to the execution of initiatives that have allowed us to reduce drilling completion and dilution costs. Lifting costs increased around $2.72 per barrel versus the third quarter of 2022, mainly explained by higher inflation reflected in the increase in electricity tariffs and tracked services. Partially offset by efficiencies totaling $0.24 per barrel. Finally, under the carbonization front, the upstream segment reduced 351,000 tons of CO2 equivalent above the effected target for the year, contributing to 83% of the group's greenhouse gas emission reduction. These results were achieved, thanks to energy efficiency initiatives in the Piedemonte fields and the reduction of methane emissions in fields such as Cundinamarca has been a provincial among others. By year-end, we expect production in the range of 720,000 to 731,000 barrels of oil equivalent per day. Let's move on to the next slide, please. In the Permian Basin, 33 new wells were drilled during the quarter for a total of 312 cumulative wells since 2019. And reaching an average production of 66,300 barrels of oil equivalent per day net to Ecopetrol before royalties. By the end of September, a record production of 120,000 barrels of oil equivalent per day was achieved in our Permian assets, of which 74,000 barrels of oil equivalent per day are Ecopetrol net. In line with our TESG strategy, our assets maintain a low carbon intensity between 7 and 8 kilograms of CO2 per barrel. Also, progress has been made in the initiative to replace diesel with compressed natural gas in drilling and completion generation operations, achieving an average cumulative substitution of 30%. By year-end, we expect an average production between 62,000 to 64,000 barrels of oil equivalent per day before royalties and the drilling of more than 110 wells. Let's move on to the next slide, please. In the midstream segment, transported volumes increased by approximately 52,000 barrels per day as compared to the third quarter of the previous year, mainly due to the higher production in the Llanos region and additional barrels from third parties that were outside of our pipeline work. We highlight that September 2023, a 42-month crude oil evacuation record was achieved, reaching 850,000 barrels per day, showing prepandemic levels. And the product pipeline transport, we highlight the performance of the Pozos Colorados gallon system, which reached the pumping rate of 160,000 barrels per day achieving a system transportation record with direct pumping to the Barrancabermeja refinery. During the third quarter of the year, a successful dilution test of Rubiales crude oil was performed at the Monterrey station where 88,500 barrels of Naphtha were received for dilution and in total, 562,000 barrels of Rubiales crude were diluted from approximately 15 degrees to 21 degrees API quality, which leverages the medium strategy of becoming an integrated logistics service provider by offering solutions that reduce transportation costs for shippers. Finally, during the quarter, the cost per barrel transported increased by $0.43 per barrel compared to the same period of the previous year. mainly explained by higher maintenance and contracted service costs as well as higher volumes of crude oil and products transported. Let's move on to the next slide, please. In the downstream segment, during the third quarter, scheduled maintenance were executed in line with the annual plan to guarantee the operational availability and the ability of the assets. As of the end of September, 90% of the annual shutdown plan was completed. And in October, the maintenance of the crude oil unit U-001 in the Cartagena refinery was also concluded. The refineries achieved a consolidated throughput of 410,000 barrels per day and an integrated gross margin of $20.6 per barrel, supported by the continuous operation of the interconnection of the Cartagena crude plants, IPCC by its acronym in Spanish, the removal of bottlenecks while achieving 95.1% operational availability. This resulted in an EBITDA of COP 2.5 trillion, may explained by the incorporation of efficiencies, feedstock optimization, higher polypropylene prices as well as favorable gasoline diesel and jet fuel prices. During the quarter, we made progress in achieving milestones, including the production of premium gasoline with less than 15 parts per million of sulfur at both refineries. Paving recycled plastic asphalt enrolled at the Barrancabermeja refinery. Essentia, a subsidiary of the Ecopetrol Group announced the start of the first advanced chemical recycling project in South America which in its first stage will recover around 500 tons of plastic waste that is difficult to recycle and transform into a raw material for new plastic elements. With the first delivery of pyrolytic oil from post-consumer plastic waste to the Barrancabermeja refinery. This project officially begins in Colombia and opens the door to producing 100% circular polypropylene from post-consumer plastic. Finally, during the third quarter, the refining cash cost increased by $1.24 per barrel compared to the 3Q, 2022 primarily due to the rescheduling of activities from previous months, higher cost execution, increased operational activity and inflation. I will now hand over the floor to David Riaño, who will comment on the main milestones of the low Mission Solutions business.

Thank you, Alberto, Ricardo for introducing me. It's a true honor to address all of you in this new role within the company that serves all Colombians. I'd like to begin by expressing my gratitude for the trust the company has placed in me and reaffirming my commitment to continue contributing to a more sustainable world while delivering value to our investors. As of September 2022, the natural gas and LPG production reached 161,000 barrels equivalent per day, representing about 23% of the group's production mix with generated EBITDA of COP 2.5 trillion and EBITDA margin of 40%. Reinforcing our commitment to position in natural gas as the energetic transition fuel during the third quarter of 2023, we launched different commercial processes that seek to contribute to the group strategic objectives. Among them, we highlight the completion of the long-term gas commercialization process of the Gibraltar, Cusiana and Cupiagua fields. In addition to the public offering of LPG quantities for the period between September 2023 and February 2024, volumes that will supply approximately 77% of the domestic market. On the other hand, the operation of our Brisas, Castilla and San Fernando solar parks in addition to the contagious small hydroelectric plant has allowed us to reduce close to 19,000 tons of CO2 accurate and capture savings of more than COP 28 billion so far this year. Likewise, we made progress in the construction of the solar parks of Cartagena, La Cira, El Copey, Ayacucho and Vasconia of our subsidiary, CENIT. In addition to the part of the subsidiary in Caucasian. This, as part of our efforts to incorporate nonconventional energy sources to our energy matrix contributing to our goal of 900 megawatts operating and in construction by 2025. Additionally, the energy efficiency program has achieved the optimization of 3.4 megawatts and more than 2,500 GBTUs. Resulting in an emission reduction of 198,000 tons of CO2 equivalent and energy cost efficiency of about COP 38 billion. the equivalent of an electric energy optimization of 5.9% accumulated from 2018 to date allows us to continue advising towards the target of 6.3% by the close of 2023. So in this front, we highlight ongoing initiatives for the inclusion of technological tools throughout the operation, such as artificial intelligence applied to energy planning and optimization of power resources. It's important to mention that Ecopetrol in response to the El Niño event has prepared to meet the increased need of this required for thermal power generation. At the same time, we have been managing the entry of renewable self-generation projects that contribute to reduce the energy requirements of national electric system. Finally, we highlight 2 important initiatives to improve the welfare of the community. The social gas program, which in 2023, has connected more than 14,000 families to natural gas service in rural areas of Arauca and Guajira and the extension of the Micro LNG agreement in Buenaventura until November this year, it is support and reliability to the gas supply for 37,000 families in this area of the. I now pass the floor to our President Ricardo Roa.

Thank you, David. The transmission and road business generated positive operational and financial results in the third quarter of the year. These results are levered in the Energy business in Brazil and Colombia and roads in Chile. This was reflected in 10% contribution to the group's revenue, 14% EBITDA to with 5% net profit over the 9 months of the year. Some of the most relevant milestone for the quarter includes first an award of Lot One in Brazil and extensions with a referential CapEx of approximately COP 2.9 trillion which will be invested gradually until the initiative of operations in 2029. Second, in Peru, the award 3 projects through the Transmantaro Consortium and the commissioning of the connection of the Nabusimake solar project and the connection to the Parque Portón del Sol, collectively adding 2020 megawatts to the Colombian electrical system. ISA continues to advance in the construction of 39 energy transmission projects in the countries where it has a presence, representing over than 7,190 kilometers of additional [ circuit ] to the network, which when operational will generate approximately $372 million in revenue. Finally, progress continues in the execution of the Ruta del Loa and the works in the concessionary to Ruta de loa Araucaria and Ruta de los Rios, which will generate new income and extensions of the consensus terms. Let's move on the next slide for the closing message. I want to close by recognizing the commitment of Ecopetrol's employees to operational excellence and the transition to more sustainable future as reflected in these positive results. I want to remind all our shareholders, investors and stakeholders of our commitment to the investment plan aligned in the 2040 strategy. This leads us to have a solid hydrocarbon business that supports the energy transition. With a stronger team and a clear vision for 2024, we are prepared to come the challenge. Ecopetrol continues to be a driving force for Colombia's development, contributing to economic growth and in well-being of the communities. Thank you, everyone, for being part of this journey. Finally, I open the Q&A segment.

Thank you very much. We will start the session for Q&A. Andrés Duarte is online with a question, Mr. Duarte. Go ahead with your question. While Mr. Andrés is able to ask his question. We will have a question with -- from Goldman Sachs. When do you expect the accumulation for CPC accounts will be in 0?

Good morning, we will go into details with a report from Milena Lopez and in this period, we can tell you that we have advanced very significantly, including this gap with the one we started this year in January with COP 33.4 billion, but with the stabilization, oil gas with that was beyond COP 16 billion with the help from the nation in money from COP 1.9 billion in resources assigned to the operation in the Cartagena refinery in the production of liquid oil. I give the word to Ms. Milena Lopez, our CFO.

Thank you, Richard. Thank you, Joel, for your question. Yes, I give you a bit of context with the advantage of the debt and how we see it ahead. We have to underline the continuous diminishment of the third quarter, that will be the increase of the oil price by the government -- the national government. We went from 2022 with the balance of the COP 7 billion we had to take it from this year 2023. We expect to close with COP 20 million and COP 21 billion. So there is a continuous improvement that we see quarter-for-quarter. In this sense, we have had several increases in oil prices. First one was in November, which was COP 600. We expect 2 more increases and this is going to bring oil to market prices. This is where it's going to be from these increases in oil prices, this would be closed. Next year, the national government has given the indication that progressively, there will be the increases in diesel so that by the end of the year, we will have a diesel price according to market. These tell us that after December 2024, we will have no more accumulations of the debt. This is the important key problem. All the balances of debt have been paid the 12 months falling the following the accumulation be has been the policy of agreement with government and I just trying to continue like this. We have COP 8 billion to be paid from here to the end of the year that we expect to receive the component. This is going to be dividends already paid around COP 5 billion and there is another part which is going to be COP 2.5 billion that will be paid in cash. This was going to bring us to the end of the year of COP 20 billion to COP 21 billion to the end of the year.

A question comes from Andrés Duarte from Corficolombiana. Mr. Duarte, you can ask your question. Mr. Duarte, we are listening to you. You can ask your question.

Hello. I'm having some trouble with the communication. So I will send you my questions. And thank you for taking my questions into consideration. And I wish great lot to everyone the rest of the year. The investment of the infrastructure for offshore gas, which we expect -- when can we expect to get this objective? Although the estimates you gave us the ones to the end of the year? I'm afraid the sound is not good. Okay. I have several questions if maybe you want to add the first one that has to do with the conditions for the offshore production. And if you are going to do an investment in transportation infrastructure. The other one is the estimate of production for 2024, especially which is going to be the evolution of production costs associated. And the last one would be if you can remind me the detail for net related to the hydrogen production. Specifically, if you already have some investments you have considered for the transportation of the liquid and also increasing the capabilities of renewable energy. I do apologize for the connection problems I've been having. Thank you very much.

Thank you, Andres, for your questions. First of all, we have to tell you that the investments for the development and maturity of the projected resources found in the region of the offshore Caribbean began this year in the assignment of resources in perforation, well, one at Orca-1 that will be maintained in 2024, and we'll continue with the campaign for preparation and COL-1 in the common exploratory well. Alberto will give you details for these expectations for production and also the objective for production for next year. We will expect to give important resources to maintain this at the closing of 2023. This is what we want to do. We want to maintain these production regimes that we will get to in 2023. And the third question will be given to David Riaño, who is going to answer to that question for the hydrogen production and the transportation infrastructure for the incorporation also from liquids and the installed capabilities that we have put updated for the strategy 2040 in the New York Stock Market.

Thank you for your question, Andres. As for the next step in the offshore, complementing what Ricardo said, I would say this in Caribe Norte we expect to continue defining and confirm the potential that we have in Uchuva. This means to have appraisal well that will start in 2024, '25. We also can share that we had good news from the Mines Ministry -- the government on the expedition of normality of abandonment. So that wells that we will do as appraisal will be used as development wells as well. We will also proceed with the environment and licensing, this is key. And the third point would be we can use the existing infrastructuring to Uchuva to bring the gas from Uchuva and from the prospect of this area of Caribe Norte and Caribe Afuera, which is Kronos, Glaucus, Gorgon. Everything is defined within the COL-5 block, we have a perspective for gas at long term. We have to work on the development scheme and we would be using it as a system of evacuation of this gas, we would have dedicated to the interior of the [ Glaucus ]. This would be as for the onshore area. And for this last quarter, we are looking at a production of over 730 barrels. The challenges we will face will be, for example, phenomenon El Nino that is going to be very aggressive and closed for Brisas and Castilla. We have to look into this. We haven't seen it yet. But I think in October, we have had a higher production than expected. And for costs, I think we are looking at an inflationary impact. And this is going to take us that the lifting cost for the last quarter is going to be very close to what we had in the third quarter this year, close to $11.9. This is in a place between $11 to $12 a barrel to the end -- for the end of 2023. For the perspective, 2024 will be part of the conversation we will have once we define the business plan. For the third question, we give the floor to David Riaño, Vice President of Low Emission Vice President.

Considering that the last update of the agenda that we announced in New York a few months before. We announced this objective for 2030 to incorporate about 900 megawatts newly generated for nonconventional renewable energy these objectives, we have established it for 2025. And the expectation for 2030 is to be able to have 1,900 megawatts from this renewable energy in a Guajira. For more details, I give the word to Mr. Riaño.

Thank you, President. Mr. President. As you mentioned, we have anticipated the delivery of renewable energy that has to do with the hydrogen projects and talking about them. As we mentioned in the question, we are maturing several initiatives as was announced in the period between 2023 and 2030. We have understood this as a stage for learning and scaling to go after 2030 in a stage of maturity when entering hydrogen to be the leader in this energetic vector in the country. In particular, we are maturing several initiatives. We have 2 projects, one in each refinery for green hydrogen. These projects are under study. They are being mature, and we expect to get for them to give the most value possible in these circumstances. Of course, this is a new technology that has challenges in the supply chain and in the implementation and construction of the projects. Additionally in the pilot scale these will start operating at the end of the year and the first quarter next year in Cartagena and Bogotá, which are going to bring us to the new stage of tests and possibilities that I just mentioned.

Ricardo Sandoval from Colombia has a question for you, Mr. Sandoval. Please go ahead.

Morning, everyone. Thank you very much. Ricardo, Milena, Alberto, David for this space I have 2 questions. First one is very simple. If you can give us a little more color on the declaration of minister Bonilla when he mentioned the entrances of Ecopetrol in energy solar and energy. Is it getting bigger programs for you for self consumption. Or is it a stage in a generation for commercialization of this type of energy. And the second issue would be about production that I just heard from Alberto about some restrictions of the El Nino phenomena that having some fields for 2024, I would like to know if we could have some guidelines about production and the production in à which is very positive for [ 3D ]. But what can we expect for 2024?

Thank you very much, Ricardo, for your questions. The first question is in -- this is, as David said, and as I presented in the last question related to the incorporation of the role of Ecopetrol in the production of clean energies from some lower wind and geothermic. This is already part of the strategy that we announced to the market a few months ago, there are no plans associated to this, but we can new -- or that could have more expectations to those that have been already placed in nonconventional energies always in the line of allowing the capacity of Ecopetrol to cover its own demand and also in the line of being able to develop this potential of resources of nature in [ eolic ] and some projects in Guajira. As important resource, cost-efficient results in the expectations of Ecopetrol to be large producer of hydrogen and low emissions in its own refineries or self-consumption and what we determine in the road map for 2024, in the world context for export. This is part of what we have studied already and the expectation of CapEx of each project are specific. We could, for example, have a participation with [ Somalis ] in these generation projects. we could also develop them ourselves, but we also have the possibility to have contracts for long-term energy that wouldn't ask CapEx -- additional CapEx. This is something we're going to be looking into and deciding the investments associated to this important issue of the economy, the new road map of the energetic transition that we have established. For the second question, I will give the floor to Alberto so that he can give details on the repetitions that could have an eventual critical condition of the El Nino phenomenon that has been evaluated. We have heard is going to be a moderate situation that could have the worst period for the effects of hydrolase and energetic projects by the end of next year.

Thank you, Ricardo. Yes, this impact in the pertinent -- we would only see them at the beginning of next year in the months that go from January to March. For the guidance for the year -- next year, we have to be very prudent and careful. We have investment and availability for resources for [indiscernible] to be able to establish which is going to be this range of production, but the Vice President has already told us that we have to try to maintain at least the same production level of 2023. So for now, this is the information that we should work with. And we expect to have these conversations at level of Board of Directors and have something that we could communicate to the market. Thank you very much.

Thank you. Next question comes from Alejandra Andrade of JPMorgan. Ms. Andrade, you can ask your question.

I have 2 questions. First, I would like to ask if you could explain a bit better the work capital that impacted the flow -- the cash flow this year in the first quarter.

Yes. Please select the interpretation mode so that we can hear you. Can you hear me?

Yes. So I have 2 questions. First one is -- so work capital for the quarter that impacted the cash flow. If you could give us more details on what happened? And the second one is for the refinancing exercises that you are carrying out this year and for next year. And the level of Ecopetrol do you have a syndicated loan and have you been able to extend loan, and you have a short-term debt. I would like to understand what was refinanced what has to be done still? And which are the exercise that you are performing in this sense?

Thank you, Alejandra, for these questions on about this, I give the floor to Milena Lopez, our CFO.

Thank you, Ricardo. Thank you, Alejandra. First thing in the working capital. When we have a change, which about COP 8.9 billion, from which -- the various component is the net of the back movement, which is around COP 2.8 billion. And largest one is the rent for COP 0.4 billion, COP 0.5 billion, which affected working capital. And the third is the change in stock, we have about 5 million barrels that affect this figure as well. This is where the impact on the work capital. And for the second question the maturities for 2023 have been refinanced and been managed, and this has been finished. We have the maturities for 2024 that we are working on. We have about $18,000 billion. This is a club deal. $1,200 million and the difference of the $600 million. It is important to note that in January 2025, we have a bonus of $1,500 million. All of these, we are refinancing it during next year. And it's important to mention that this credit is going to be refinanced, especially with the same banks. We have talked about this, and we have presented all the documents from the Ministry of Finance. And this is important to underline as well. Also and for the other question on the adjustment for oil prices, I think we already answered this question. Thank you very much.

Thank you very much. We do not have more questions -- live questions, so we will read. From UBS, we have for the expectations of adjustment in the prices for oil in future, especially diesel, since it has a gap with international prices and the larger participation in the tech. And also a question, as the year-end, the attention is on the expectation of dividends. Do we have expect something closer to the lower or higher ranges of the 40% to 60% with a tax income tax higher but the government using its part to compensate the EFP -- IFP?

Thank you, as for the question. On the expectation for adjustments on the oil prices [ in ] who we haven't this year and next year. Milena already presented what we talked about with the Ministry of Finance, and this shows that in these deliberations with this platform that we have on oil prices and diesel prices are going to continue advancing even if we do not have a mutual figure on what this increase going to be. The valuations of the finance ministry tell us that it was going to be a deliberation of this price of diesel. We are going to continue with the restriction to apply and get to an equal price in the price for oil for the final consumer. We have indicated which are the numbers which we would negotiate and that Ecopetrol would have -- from these policy articulated by the national government. For the liberation of subsidy oil prices with oil and diesel for the stabilization of prices. With the expectation of dividends, I give the word floor to Milena so that she can tell us what is being observed in the Ministry of Finance in the medium term figures and the declaration of a possible approval and distribution of dividends next year.

Thank you for your question. I'm going to divide the answer into the first component, giving clarity on what is for this year and then the expectations for next year. In order to finish the payments from here to December 31, there is a possibility of an extraordinary dividend to pay at this point COP 9 billion missing for this year. We are going to receive this amount in -- and so there will be no extraordinary dividends this year. So the policy of dividends, we have a policy for a payout between 40% and 60%. And in extraordinary circumstances, we have given higher payouts. We do not have a range to give you for next year in what this payment could be. This will be determined in March in the general shareholders assembly and long -- as soon as we have some information, we will be giving it to you. Thank you.

Alejandro [ lead from Michelis ] from [ Nash Securities ] asks, how can we expect cash flow for next quarter? And which level is sustainable for Ecopetrol?

Thank you, Alejandro. For the question one of part of it was already answered by Milena, but I give her the floor so that she can ask -- answer the question the expectation of cash flow for the next quarters.

I think when we look at the free cash flow for Ecopetrol, the main subject is that moves this cash flow is the fintech account, which is payable and accountable, receiving account. And inevitably, this is the highest limit that we have in the cash flow. I can repeat what I said in last question, I said that this balance has been reducing itself quarter -- diminishing quarter-on-quarter. So if we look at the accumulation figure of this year, this was about COP 7.9 billion. If we look at the figure in the third quarter this year, this was about COP 0.6 billion, COP 0.7 billion -- COP 4.7 billion to be exact. And when we look at the figures from here to the end of the year, the figure is going to be lower because we continued with the increasing gas prices. So the most important decrease that we are going to see during next year going to be this one and we're going to have the increase in diesel prices, and this is going to take us to eliminate from here to the end of next year. to generate the elimination of these cash flows in Ecopetrol. I've said this many times, this policy of dividends from 40% to 60% is what we consider the level of dividends for long term that the company should have in order to have enough cash to have our plan of investments and cash flow as there are exceptional events, we have paid a higher dividend. And this has happened last year in order to cross it with our debt. And it's important to underline that this has been possible because we have had crude prices that are higher. So they go hand in hand and it's not something different to what our payers have done in other oil companies, which is rebuying stocks. This is something we cannot do. So this order of ideas. This is what I think that could be the medium-term policy in respect to dividends.

[ Leonardo Marcon ] from Bank of America. Which are the expectations of production for the fourth quarter and from where should come most of this increase and also the investments of capital in this quarter have been very high. This supports a higher investment of the company in the last 7 years. Most of it was in [indiscernible], right? So does it mean that we're going to see a higher increase of production in the fourth quarter?

Thank you, Leonardo. One of the questions is the production expectations for what is left of this year and the expectations of growth for next year. We have already mentioned that we expect to close the year with a production close to 730 barrels per day. This call, as said at the beginning, was in 735 barrels per day, and we also reported in this third quarter in very important investments in the upstream and also in the energies for low emission energies and for more detail on to both questions, I give the floor to Alberto Consuegra.

To answer your question, I would say the highest would -- investment would be on Rubiales and Caño Sur and these have the greatest investment and also the best expectation for production. Of course, the investments for capital this quarter have been very high for capital execution, which means that the number of wells that we had contemplated in the plan and the number of interventions in wells or treatment of wells have been executed in line. And we have 732 wells already drilled in the end -- by the end of the year. So in fact, this investment is being given in the strength. And as the President said, we are waiting to see an effect in the growing production that is going to take us above 730 barrels by the end of the year.

Thank you very much, [ Agustino from Greenbridge ] is asking, which are the alternatives that you analyze to refinance the credit of COP 1.6 -- thousands of millions consolidated in [ FBT ] that went to $4,000 million.

Thank you, Agustin, for this question. Milena, please take the floor.

Thank you, Agustin. We have a syndicated credit [ $1,200 ] million, and the other amortizations are credit short-term credit. That's indicated, we are going to refinance, especially mainly with the same banks of the syndicated. So this has been agreed and it's in process. The maturities of these COP 400 million, we will probably do it with local bank and these are short-term credit, especially with local banks that are being getting mature. When we look at the debt consolidated play that we have to [ see ] at the we have loans in ISA. When we talk about the debt that we have to pay next year in Ecopetrol. We're talking about this $1,800 million. The rest is just credit that we have in the [ fillers ] and this ISA is, of course, the great challenge, and we have things in Peru, Chile and Brazil that are being consolidated.

[ Santiago from Gregory ] is asking. From a role of Ecopetrol in generating energy in Colombia, which would be the implications in the investment plan of the company.

Thank you, Santiago. As we have said in other answers to similar questions. Ecopetrol needs a road map and expansion in the incorporation of renewable energy production is to lever its own production in the demand of these electric energy in order to covering its own needs for energy. So we have some important resources for the corporation of these nonconventional energy resources 1,600 megawatts in projects that we are evaluating with the scheme of incorporation of energies has not been decided yet and has a lot to do with possibilities starting with being partnered with a third party to develop a project or be the full owner of the active generation or incorporating these synergies through the long-term contracts of PPAs that also give us an opportunity that would require low investment until financing that could be from the emission of the scheme of the project, we are going to have the necessity of making important investments or doing it with third parties.

Lily Yang from HSBC asked. Could you please mention the investment plan for 2024 and '25.

Thank you, Lily, for the question. Yes, we have an ion expectation of construction for the road map for 2024, '25 and '26 is a 3 -- triannual plan, and we are considering in the Board of Directors for the goals of investment in '24. We can tell that we expect to have the levels of production that we are going to have this year. And we are based in this -- and based on these levels, we are determining the investment possibilities to be presented to the Board of Directors for the expenses and investments for next year. And Milena, you have the floor for more details.

Thank you, Ricardo. The only thing I could add to what Ricardo said because we are building the plan at this moment. And maybe at the beginning of December, we will be able to tell you how we see the investments and production goals, et cetera. But we have to see that we have an investment plan that is all in line with the production, which is COP 6 billion to COP 7 billion, and I think we will be within these figures, and we will give you details in December. Thank you very much.

Katherine Ortiz from Davivienda stakeholders, taking into account the strategic plan of Ecopetrol that we just -- and its energies focused on gas. Is there the possibility to import the gas from Venezuela? And also if the government have -- even if the government has increased the price of oil to close the debt gap, how much comes to oil and how much to diesel? And when will the increase begin?

Thank you, Katherine. First of all, we are reevaluating in the medium and high levels this balance of offer of natural gas in the country where we are studying alternatives of supply or source in the different sources that Colombia has imported natural gas, especially to balance these relation offer demand that we have very tight with the presence of phenomena such as El Nino where there is larger demand for Jamaica production in the industry and e-commerce and residential consumption. So facing these expectations, our scenarios allow us to see that there would be some gas deficits for next year from [31 GBTU]. And for 2026 to 250 GBTU per day and we are considering different alternatives in order to leverage this deficit of the country. in this medium range scenarios. So I give the floor to David Riaño. And for the second question, we have already explained in detail, which are the expectations that Ecopetrol has in closing this gap that began this year with FEPC resources that has significantly been reduced with the policies of the government with liberating this price and getting to this parity price. And we would be by middle of next year, before trading [ master ] we would be facing these parity cost that will be translated to the users. First part of the question, Mr. Riaño and then for the second part of the question, Milena will tell us for the participation of gas and diesel in closing this FEPC gap that would increase the demand of these products in the country. Yes, Mr. Riaño.

We are working very hard in guaranteeing the energetic security for these oil covering the expected demand without problem. We're looking at different options, and we will see which portfolio will allow the best efficiency in assuring to this demand. As the President said, it is an option. And the country in the third quarter of 2023, importing about 2 and 3 GBTU per day, which could cover a percentage of the national consumption. The importing Colombia has allowed us to guarantee the supply of gas in the country, and we have to see that there is a source of energy that has to be contemplated among other because there is not only one possibility for import. And in the group, we have analyzed several additional to the one we have this today and always looking for the best efficiency resulting to this demand and guaranteeing the supply in the short, medium and large and long terms.

As for your question for the differentiation of the FEPC in oil and diesel. The accumulated deficit corresponds to oil to gas or petrol in monetary terms, the third quarter has COP 2.7 billion were [ 800 -- 8,700 ] were from gas and the rest for diesel. So next year, we're going to have the parity with gas. And so the next deficit will be due to diesel.

Thank you very much. Daniel Guardiola, BTC asked. Which would be the gas oil prices to have the offshore infrastructure prices covered, investment covered?

Thank you for the question. On this course, all the exercise that could take us to a price offshore gas for it to be -- for the expectation to be viable. All these analysis are being evaluated for there are important reserve volumes and on the quantity in order to develop the necessary infrastructure for its export and all these elements once we do all the analysis will give us a very clear sign we have not designed clear figures on this, and we could give us a price -- reference price the prices that are being in the market and that have been compromised. And this would be a reference, but it is not the one that is giving us reference value for gas that could make viable leads exploitation or its commercialization in the system.

Diego Sanchez from [ Elian Salares ]. Which is allowed for [ Reficar ] and the potential indemnity is -- has it been considered to sell the stocks and 15% in order to contribute that markets can go beyond the border?

This would be one of the alternatives, but we do not have in the agenda or the administration of Ecopetrol or the Board of Directors, a proposal of this type. We -- there are elements that we are going to study in the strategy that the country could consider. But for now, more than thinking in a placement of additional stocks in the market. We are first thinking about the reinforcement of the traditional lines in generating greater wealth. And of course, it would be one of the actions that we will evaluate together with the Board of Directors. But today, this subject is not in the agenda of Ecopetrol. With the [ Laudo ], yes. And for the [ Laudo ] the valuation with the CPI, we have worked in the Board of Directors with the Cartagena Refinery in getting all the first ready where we can follow these resources. We expect -- we expected last month by the end of last month, the sentence in the judiciary in these refinery in the court of New York. It has taken some time so that CPI in the markets do not have many, many actives. So we could continue with the see the -- we're talking about $1 billion and these resources, we are following -- we're talking about the United Kingdom, Holland, and we have important resources and in the declaration of CPI of these markets due to renegotiation or review of the passives, we have had to hire the best attorneys and follow the best the best process for this penalty and this is going to be in the New York court and also the judiciary levels that could accept this recognition that CPI would do from the passives. And this is why we are continuing to see -- we're seeing this study and the decision on the future of the Cartagena refinery.

Janice from [indiscernible]. Can we expect an increased level of debt phasing 2024?

Milena here, for our debt for next year, we have a series of credits that we will be refinancing. So the question is from the incremental debt. There will be no substantial increase in the debt next year, depending on the level of payment of dividends. And the speed of the increments of diesel -- of the increase of diesel, we could have a marginal debt for our additional investment, but figures, very low compared to these years, there could be something marginal from Ecopetrol, but nothing really significant.

We do not have more questions at this moment, and we will give the floor to Mr. President for a final closing words.

I want to reiterate and thank all the team of Ecopetrol and to you all, thank you for your participation in this third results call for the third quarter. A great end of day for all of you. Thank you very much. So we finish our conference.