Transportadora de Gas del Sur SA TGS

Welcome to the TGS 2020 Q3 earnings release call. Throughout the call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. And just to remind you, this conference call is being recorded. Today, I'm pleased to present Christian Johansen, the Chief Executive Officer. Please go ahead with your meeting.

Good morning, everyone, and welcome to TGS Q3 2020 earnings call. My name is Christian Johansen. I'm the CEO of TGS. I'm calling in from Houston this morning, and with me from Oslo, I have our CFO, Frederick Amundsen. This morning was, to me personally, a good illustration of the unprecedented times we're going through. I woke up at 5 a.m., checked the market reactions to our Q3 report, and noticed that the share price was down 1.5% despite severe cost-cutting and positive cash flow. The oil price continued to slide to a level below 37 for Brent, and most oil service companies' share prices are quoted in cents rather than dollars. Getting out of bed, I get a text from my daughter's school saying that school is closed due to two new COVID cases. When I finally get to the office, there is a gift on my desk from the marketing department. The gift is a nice gray face mask with a TGS logo that our clients can look forward to receive for Christmas this year. COVID-19, global demand for oil and gas, and a consistently low oil price are factors completely outside our control. What we can control, however, is the following. Number one, cost. Well, we are reporting 64% lower cash operating costs than Q3 of last year. Cash collections. where we collected $109 million in the quarter, which is only 16% less than last year. As a result, we had positive free cash flow in Q3, which again provides support to a dividend of $0.125 per share, corresponding to a dividend yield higher than 5%. Last but not least, our revenues are to a certain degree within the control of management, and I'm happy to notice that our late sales versus peers continue to be superior. In the presentation that we posted on our website this morning, we're focusing a lot on cost and cash flow. The market has developed as we expected, and our cost-cutting measures are exceeding our plan. We have a good strategy for how to continue being cash flow positive, distribute cash to our shareholders, and at the same time take advantage of the down cycle, as you've seen TGS do many times before. Our 2021 investments will be lower in dollar value, but probably quite similar in terms of data volumes, the reason being lower vessel rates, more use of risk sharing, and a more selective investment strategy centered around a few geographic areas where we continue to see healthy demand. We continue to be focused on supporting a sustainable future by providing quality data and insights in the most resource-efficient manner possible, were contributing to minimizing the industry's environmental footprint. This year, we have introduced several initiatives for reducing emissions and further enhancing contribution to social development, as well as improving the ESG reporting to stakeholders. The efforts have been recognized in the government group's annual ESG ranking, which recently gave TPS an A- ranking. The energy transition offers interesting opportunities for TGS, and we see growing interest for alternative uses of TGS products. The world's largest library of subsurface data combined with strong competencies in areas such as geoscience, data management, data processing, and analytics position TGS well to contribute with insights related to carbon capture, utilization, and storage, and offshore mineral exploration, as well as to the renewables energy industries. We've already had several projects directed towards CCS, renewables, and DSM, and the fact is that some of these have already generated revenues for TGS in 2020. In the future, our ambition is to capture a greater part of this rapidly growing market that is very complementary to our asset-light data model. Once again, I would highlight that we have a plan, we're delivering on this plan, and we continue to believe that we will come out of this cycle with an even stronger position. With that, I would like to hand it over to the operator who will open up for questions. Thanks.

To ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of John O'Learson of ABG. Please go ahead. Your line is now open. I stand corrected. We are actually going to a question from the line of Christopher Muller-Lurken of Carnegie. Please go ahead. Your line is open.