Ecopetrol S.A. (NYSE:EC) Q2 2023 Earnings Call Transcript
Ecopetrol S.A. (NYSE:EC) Q2 2023 Earnings Call Transcript August 12, 2023
Operator: [Call Starts Abruptly] And Operational Results for the Second Quarter of 2023. There will be a question-and-answer session at the end of the presentation. 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 on this conference call. The call will be led by Mr. Ricardo Roa, CEO of Ecopetrol; Diana Escobar, Vice President of Sustainability Development, Yeimy Baez, Vice President of Low-emission Solutions, Alberto Consuegra, COO and Jaime Caballero, CFO. Thank you for your attention. Mr. Roa, you may begin your conference.
Ricardo Roa: Good morning, everyone, and welcome to the Ecopetrol Group's second quarter 2023 conference call to present our operational and financial results. We appreciate your participation. First, I would like to highlight the dedication of our entire team, which has allowed us to achieve outstanding operating results in such a challenging market environment. Second quarter production average 728,000 barrels of oil equivalent per day with a yearly increase of 23,000 barrels versus the second quarter of 2022. And the highest quarterly figure in the last three years. This dynamism is a result of the strongest execution of our operation and increased production from strategic fields, including Cano Sur and Rubiales in Colombia and Permian in the United States.
These fields have played a crucial role in supporting our growth, allowing us to meet our production targets for the year today. In the second quarter of this year, we recorded revenues of COP34.3 trillion, EBITDA of COP14.6 trillion, and net incomes of COP4.1 trillion. These figures are consistent with the 2023 financial plan. These results are supported by: Firstly, an enhanced operating performance through record in production, pumping lots in zone of our transportation system and refining throughputs, and clean fuel pollution loads in our refineries. Secondly, the exceptional results in Permian, Recetor, ISA, and Ecopetrol trade in Asia. Firstly, a positive impact of the exchange rate from sales and an efficient commercial strategy. During the second quarter, we reached the following significant strategy milestones.
In May, we complete negotiations on the collective bargaining agreement for the next four years. The negotiation took place within a constructive and respectful trial with union organizations, finalizing with an agreement that will concurrently benefit our workers, the company, and the country. In June, Cartagena was notified of the international arbitral tribunal decision regarding to the claim filed on the January procurement and construction contract. For the expansion and modernization of the refinery. The arbitration process was initiated through a request filed by Reficar in March 2016, and correlating a contract breach with decision notified is subject to corrections, provisions, and clarifications of the records of the parties. This same amount were ranked in the top spot of the [indiscernible] Colombia 2023 timeframe.
The business monitor of corporate reputation Permian and Ecopetrol as the best company for attracting talent in the country. This first half of 2023, we have added more than COP23.6 trillion in transfer nation, so that is royalties and dividends maintaining our current contribution to national development. On the other hand, the account receivable to the fuel price stabilization fund had the lowest average approval since January 2022. Finally, I would like to highlight that the cumulative CapEx execution to the second quarter at least COP12.3 billion being the highest in healthy early view in the last seven years demonstrating our commitment to innovation and growth. Please continue the next slide. During the first half of the year, we faced a highly uncertain macroeconomic situation.
The possibility of conversation in the developed were high-interest rates and bank illustrate in the United States together with this lockdown in the Chinese economy. Have impacted the price up-to those and refine products introducing whether volatility to the market. Despite these challenges, we have excelled because of our companies operational resilience and adaptability. We have found opportunities within the current situation as OpEx could have focus on remediate goods and USA strategy to sale -- purchase seek out great similar to those we offer. We have been able to explore the opportunities with our ongoing strategy in at the versatile markets and destinations emphasizing the strategy position of our trading subsidiary in Singapore. Ecopetrol Trading Asia which has sold over 85 million barrels of crude oil in the Asian market.
During this quarter, could oil sales to the Asian [ph] continued to represent 54% of our results. Ecopetrol Trading Asia also successfully translate carbon-neutral could cargo is in line with the company's TESG agenda. Its EBITDA for the second quarter of 2023 reached $62.5 million an increase of 42% over the previous quarter. In addition, the CO2 through of the Carbon Trading desk has allowed us to commercialize 10 million barrels of accumulated carbon offset crude oil as of last July. Also, the commercialization of asphalt with recycled plastic with an export level of 350 tons and the distribution of five projects in Colombia has boosted the energy transition and circular economy in region. All the commercial performance has allowed as trend in the differential of the crude oil basket ensuring our positioning in the market.
The capital group continues production each all-inclusive strategy of efficiencies and competitiveness, allowing us to uphold the company's solid operating performance despite inflationary and market challenges. We're confident in our team's ability to meet the facilities and remain committed to sustainable growth and success in this dynamic business climate. I now give the floor to Diana Escobar, Vice President of Sustainable Development, who will update you on our progress in the company's total impact.
Diana Escobar: Thank you, Ricardo. Ecopetrol's commitment to generation of social value was evidence during this quarter through advancements in the performance of our social and environmental investment plan, which in 2023 total COP766 billion a figure equal to nearly 5% of the comparable investment by the nation's general budget. I would like to underscore the most relevant achievements during this past quarter. We highlight the start of the second phase of the Meta food supply network program in partnership with the food and agricultural organization of the United Nations. Over the next three years, this program should positively impact 3,000 farming families and 32 associations in the region, strengthening production change under commercial liability.
Moreover, a cooperation agreement was defined with the national government and companies in the industry to paid 43 kilometers of the Puerto Gaitan to Rubiales road located in the Department of Meta with an investment of more than COP214 billion. This project will sponsor, they are growing industrial productive and rural development of the European region, enabling over 1 million hectares with agricultural development potential and generating a positive annual impact of over 2.5% on the regional GDP. We also emphasize the successful national summit of the Ecopetrol's entrepreneurship social investment program with the engagement of 1,576 entrepreneurs, micro and small enterprises from 45 municipalities that will receive benefits this year. In education, our school quality and retention programs have aided 641,000 students, which is 8% of the total enrollment in public educational institutions nationwide.
Regarding the expansion of higher education coverage through the Ecopetrol graduate program. This quarter we awarded 94 new scholarship to students in rural areas reaching a historical total of 1,761 beneficiaries to date. In healthcare, our mobile unit Magdalena Medio has assisted more than 6500 people in seven Municipalities of the Mid Magdalena region with access to low complexity health services, which is equal to 8% of the vulnerable population in this area. Regarding access to utilities, namely gas, water, and power supply, our social gas program, certified gas, service connections for more than 5,200 new households in the departments of Atlantico, Santander, and Casamari concerning water supply, we highlight the provision of COP6.5 billion for the construction of one public drinking motor well that benefits more than 13,000 people from ethnic group, as a part of our commitment to provide water supply solutions in the department of La Guajira.
In access to electricity we participated in a task force led by the Ministry of Mines and Energy seeking to define a portfolio of initiatives that can develop into self-sustaining energy communities. Our social investment portfolio has been further strengthened with the allocation to the Ecopetrol Group of 27 new projects valued at COP167 billion through the work for taxes mechanism. Our business group have the highest participation in this mechanism, 37% of the nationwide allocation. Finally, we would like to highlight the social dialogue processes carried out with the communities in our areas of influence. In the quarter, we conducted 13 dialogues processes involving more than 1000 social actors nationwide, for the participation of community action boards, academia, businesses, and local institutions.
In addition, we launched the Ethnic Inclusiveness Support Program called Forming and Diversity. Training with you and past to Siberia Ethnic communities in Nagzira and Putumayo to strengthen their individual and organizational competencies. In this way, to our business lines, we contribute to generate social value throughout the country, closing gaps, and improving the quality of life for those most affected by social inequality. I will now turn the floor over to Jaime, who will present the key financial results for the second quarter.
Jaime Caballero: Thank you, Diana. Ecopetrol recognizes that generating long-term value in a context of energy transition, requires an integrated balance between the achievement of financial profitability goals and the delivery of our strategic technology, environmental, social, and governance commitments with our stakeholders. Our performance dashboard shows significant progress in this regard. Technology is the main accelerator of this strategy generated benefits for close to up more than COP1 trillion in the first half of 2023 through increased revenue generation, cost reduction, avoided costs, and productivity increases. On environment, the Group, aware of the active role it must play in terms of climate change and energy transition, has made progress as follows.
Regarding emissions reduction, during the first half of 2023, the Group achieved an accumulated reduction of greenhouse gas emissions of 1.09 million tons of CO2 equivalents in Scopes one and Scopes two, mainly in the upstream and downstream segment through different enablers such as fugitive emissions, venting, flaring optimization, energy efficiency programs and the use of renewables. A cumulative reduction of 1.40 million tons of CO2 equivalents by 2023 with respect to the 2019 baseline is projected. On water the following has been achieved. First, an average water withdrawal of 657,000 barrels of water per day for industrial use, well below the withdrawal limit of 724,000 barrels of water per day established for the operation. Second, a 49% reuse of freshwater withdrawal achieving an over compliance of 123% compared to the target set for the first semester of 2023.
And third, a 29% reuse of production water affected by the pressure injection flow systems in [indiscernible] but compensated by the good performance of the other two indicators. As part of the ambition to incorporate non-conventional and alternative energy sources for self-consumption and promotion of cleaner energies, the company plans to incorporate 400 megawatts by 2023. Currently, 208 megawatts are in operation and another 200 megawatts are under construction to deliver the set target. Regarding social matters, in addition to the milestones previously mentioned by Diana, the following stand out, the 4,298 non-oil jobs generated that contribute to diversification of local economies and the 55,659 students benefited through quality and educational coverage projects.
In terms of governance, the company maintains a solid and transparent corporate governance with a level of independence of 78% of its Board of Directors and a 33% female representation. These guides the fulfilling of the company's strategy and is evaluated in indexes such as the Dow Jones Sustainability Index, where Ecopetrol Group aims to maintain or improve the corporate governance rating obtained in 2022. Please move on to the next slide. During the first half of 2023, we achieve outstanding financial indicators, amides an environment of lower crude oil and refined product realization prices. Roche recorded its second-best result since 2016 and closed the semester at 14.8% above the target of 10% for the year and higher than the average of around 11% reported by peer companies to date.
The impact of higher fiscal contributions and the increase in capital employed was partially offset by higher operating income in the last 12 months. EBITDA margin was 44.3% mainly explained by the lower average rent price compared to the first semester of 2022 and the lower cracks of refined products, diesel, gasoline, and jet, which was partially offset by the net effect on revenues and purchases associated to the higher average exchange rate. Likewise, there was an increase in activity costs and operating expenses associated with the increase in activity in terms of production, refinery throughputs, and transported volumes, as well as some inflationary effects. During the semester, Ecopetrol Group recorded a higher EBITDA margin compared to its pear companies, which reported an average margin of around 34%.
Regarding EBITDA by business line, a 78% contribution of hydrocarbons stands out underpinned by the upstream and midstream segments. Transmission and toll roads contributed with 16% of the EBITDA mainly associated to the results of the energy transmission segment. Finally, low emissions contributed with 6% of the EBITDA explained by a higher gas contribution. The gross debt to EBITDA indicator remained stable at 1.6 times below the target of 2.1 times for the year. The debt-equity ratio was 1.1 times primarily due to the higher financing U.S. dollars acquired mainly by Ecopetrol S.A. in the first half of the year. During the first half of 2023, Ecopetrol Group generated an operating cash flow of COP5.2 trillion as a result of the solid operating performance and the positive effect of the average exchange rate, which offset lower organization prices and the inflationary effect on cost.
Operating cash flow accounting for the balance of FEPC, which I'll explain in detail later, would be COP18.2 trillion at the end of the semester. Please move on to the next slide. In the first half of the year, Ecopetrol's organic investments amounted COP12.3 trillion, the highest half-year figure in the last seven years, 41% above what was executed in the first half of 2022, and in line with the target for 2023 of between COP25.3 trillion and COP29.8 trillion. This demonstrates the company's execution capacity in line with the target set out for the four pillars of the 2040 strategy, and contributes to our commitment to the economic growth of Colombia and the other countries where we operate. The hydrocarbons business line as a strategic priority for the company and as an enabler of investments in the energy transition, closed the semester with a solid execution for COP8.4 trillion, which represent 69% of the group's investments.
These investments were represented in growth projects throughout the integrated chain, both in Colombia and the United States. The investments in low emission solutions and TESG closed at COP1.5 trillion of which circa COP1.3 trillion were allocated to gas projects focused on assets located in the Piedemonte and other exploratory blocks. In TESG resources were allocated to decarbonization projects, efficient water management and operations, energy efficiency, fuel quality, and hydrogen. Investments in the transmission and toll roads business line amounted to COP2.4 trillion and corresponded to projects executed by ISA in energy transmission, toll roads, and telecommunications. These investments allowed progress in the construction of the electric circuit and in improvements aimed at increasing the reliability of the existing network, as well as in Ruta del Loa, Ruta de la Araucania and Ruta de los Rios road projects in Chile.
Copyright: 1971yes / 123RF Stock Photo
Please move on to the next slide. At the end of the first half of 2023, Ecopetrol recorded a consolidated cash position of COP13 trillion explained by first an operating cash flow generation of COP5.2 trillion, mainly associated with higher sales volumes due to higher production, the solid performance of the midstream and downstream segments, as well as energy projects. This was partially offset by the increase in working capital, mainly due to the accumulation of the FEPC account and the payment of income tax in some subsidiaries. Secondly, the outflow of investment resources for organic activities for COP10.7 trillion, mainly made by Ecopetrol and its subsidiaries, Permian, ISA and CENIT. And thirdly, the outflow of resources for the payment of dividends for COP2.6 trillion to minority shareholders and subsidiaries.
Regarding the management of debt maturities for 2023 at Ecopetrol, we continue to advance in the refinancing strategy with which in June it carried out. A partial disbursement of close to COP693 billion from the financing line with bank Colombia, the prepayment of debt maturing in 2023 for $305 million. The issuing of bonds in the international capital markets for $1.5 billion and the launching of the repurchase offer for around $822 million plus interest for the prepayment of the remainder of the international bond issued in 2013 executed in August. As a result, the balance on maturities for 2023 at the end of August is close to $198 million, corresponding to principal installments of long-term debt. As for the average cost of debt, between the end of the first half of 2022 and the first half of 2023, the cost increased 28 basis points and close at approximately at 6.07%, which represents a highly controlled growth, despite the generalized context of higher international interest rates.
It is also noteworthy that, despite the higher costs, average exchange rate, and indebtedness, the increase in financial expense between these periods was only 1%, reflecting the company's ability to manage its debt even in a challenging rate environment. The company does not expect a substantial increase in the cost of debt for the remainder of 2023. Regarding the FEPC balance, the account receivable closed at COP30.9 trillion, reflecting an accumulation of COP13 trillion during the semester. Likewise, compensation was made without transfer of resources between the balance receivable from the FEPC account and the dividends in favor of the nation for COP8.4 trillion, leaving an amount of COP13.2 trillion pending for compensation. It is important to mention that, thanks to the adjustments in the price of gasoline and the price environment, the monthly accumulation of the FEPC has been decreasing and is expected to be below COP1 trillion per month in the second half of the year.
Finally, it is important to reiterate that, the financial priorities of the Ecopetrol Group continue to be the value generation, through the delivery of the investment plan, proactive and competitive debt management, and the distribution of dividends as cash conditions allow. I will now pass the floor to Yeimy Baez, who will give us more details about the Low Emission Solutions business line.
Yeimy Baez: Thanks Jamie. In the first half of the year, the gas LPG production reached 160,000 of equivalent oil barrels per day, 22% of the Group's production mix. This business delivered an EBITDA of COP2,142 billion with an EBITDA margin of 47%. Our continued efforts to decarbonize our operations were blostered by the implementation of a wide range of initiatives and investment projects of low-emission solutions, aiming to significantly contribute to our strategic objectives. I would like to highlight the reduction of fuel and gas from -- Pizzorama and [Indiscernible] fields by the means of connecting them to the gas market to offer additional volumes of about 1400 MBTU per day. This initiative allows us to reduce emissions of more than 36,000 tons of CO2 equivalent per year.
We also were able to implement energy efficiency initiatives that led to reduce 5-gigawatt hours, 2-megawatts of consumption, equivalent to the electricity consumption of 16,000 and another 110 giga GBTU of thermal image. Energy management operational control and the use of slurry and bending of gas for cell generation of energy resulted in the loss -- We continue to work on sustainable mobility during the second quarter of 2023. First, we started to deliver financial support to natural gas vehicles with the gas truck program, a fund of COP730 billion that includes an endowment by Ecopetrol. Second our subsidiary Asian pr. renew its transportation fleet with four gas-powered brand-new trucks in its operations. And finally, we deliver the first hydrogen refueling to the public transportation bus in Bogota for commissioning test.
With the support of semi and 1H22. It is estimated that all these initiatives in sustainable mobility will achieve a reduction of more than 570 terms of CO2 per year. I'll give some further remarks on a capitals effort to improve the wellbeing of the Columbia people. To date the program to connectable communities, to the natural gas has delivered 4,843 connections positively impacting families in rural areas of [indiscernible] and Atlantico, Santander, and Casanare have been the main vehicles to meet the target. We also signed new agreements that will allows us to expand the program coverage to connect another 4,000 families in 2023. In addition, we extended the micro LNG plant operations in Buenaventura until November, providing reliability of gas supply to 37,000 families in this area.
Their company has done a significant amount of work to enrich its renewable energy portfolio. To that end new technologies have been introduced to our opportunities panel such as biomass, geothermal, and small-scale type. The operation of Brisas, Castilla, and San Fernando solar farms, as well as the Cantayus Small Hydroelectric Plant that allows us to reduce 5,883 tons of CO2 equivalent and save COP6,950 million in the second quarter of 2023. We're also making progress in the construction of new photovoltaic capacity in Cartagena 23 megawatt, La Cira 56 megawatts, Copey, Ayacucho, and Vasconia solar farms with 15 megawatt and Caucasia with other 7 megawatt, which will contribute to the incorporation of 101 megawatt to our renewable energy metrics by the end of 2022.
Finally, last June, we held the energy transition for three days, more than 3000 people, including Ecopetrol employees, international and local leaders, and experts gathered to share knowledge of the national and global context, industry experience, technological trends, and challenges of the energy transition. We continue to leverage the consolidation of the architecture for the business line, trend in the strategic pillar of cutting-edge knowledge. At Q3 for our 2040 strategy energy that response. I'll now the pass the floor to Alberto who will talk about the main operational license.
Alberto Consuegra: Thank you, Yeimy. Progress in the 2023 exploratory campaign reached 40% by the end of this semester. As we completed the drilling of 10 exploratory wells, seven of which have hydrocarbon potential and are located in the Llanos Orientales to having gas condensate potential in the Piedemonte Foothill, and one with natural gas potential in Northern Colombia in Cordoba. For this quarter, I would like to highlight the announcement we made about the success of the Tinamu-1 exploratory well operated by Ecopetrol located in Castilla la Nueva in the Department of Meta confirming the presence of 15 degrees API heavy crude oil. Extensive testing planned to begin in the third quarter of 2023. We made important progress in the assessment of onshore discovers.
In Northern Colombia in there receive area early production connection of the Coralino-1 [indiscernible] discoveries to existing infrastructure is underway. Extensive testing expected begin by the end of 2023 for potential commerciality in 2024. With regards to the Flamenco's discovery located in the Mid Magdalena Valley, the Flamenco is now commercially viable and the production license is expected to be awarded during the second half of 2023 in order to proceed with extension of commerciality for Flamencos 2,1,3 wells. Finally, extensive tests are being carried out in the Upper Magdalena Valley on the El Nino-1 [indiscernible] 2 wells and in CPO9 on the Col-1 and Lorito wells. Progress in offshore exploration activity in Colombia includes assessing the results of the Gorgon-2 appraisal well and the drilling of the Glaucus-1 well in the same area, which is expected to reach total depth in the second half of this year.
In addition, we continued with pre-drilling activities of the Orca Norte-1, well as part of the appraisal process of the Orca discovery, and with the planning of the appraisal campaign of the Uchuva discovery to start in 2024. As part of the ongoing consultation with government agencies, mediation agreements were signed with the National Hydrocarbon Agency, ANH [indiscernible] National State Legal Defense Agency. Concerning controversies regarding the exploration and production agreements for the [indiscernible] Magdalena areas. Let's go to the next slide, please. During the second quarter of this year, we achieved production of 728,000 barrels of oil equivalent per day, up 3.3% versus the same quarter of 2022, driven by a solid performance of Rubiales and positive results of the drilling campaigns at Cano Sur and Permian.
These results were obtained despite the negative production impacts of around 6,400 barrels of oil equivalent per day. During the second quarter of the year due to social unrest issues, including the [indiscernible] closures, as well as load restrictions, and the temporary shutdown of the gas planting [indiscernible] due to attacks to the Cano Limon Covenas pipeline. We continue to make progress in decarbonizing our upstream segments. During the first half of the year, we highlight the development of projects that will eliminate emissions at the [indiscernible] production facilities in line with our commitment to reduce methane emissions by 2045. During this period, the upstream segment subsided in reducing 141,000 tons of CO2 equivalent emissions, which is above expectations for the semester.
Let's go to the next slide, please. After three years of the start of operations in the Permian. The joint venture between Ecopetrol and Oxy reached a record production at the end of May of a 100,000 barrels of oil equivalent per day before royalties, with approximately 62,000 barrels of oil equivalent per day corresponding to Ecopetrol's participation. In addition to the production in the Midland Basin, we highlight the start of production in the Delaware area, after drilling and completing the first 19 wells. During the second quarter of 2023, we drilled 22 new wells, totaling now 279 wells and reaching a net production for Ecopetrol before royalties of 58,700 barrels of oil equivalent per day. By the end of the year, more than 110 wells are expected to be drilled and production should reach an annual average daily production in the range of 62,000 to 64,000 barrels of oil equivalent per day, before royalties for Ecopetrol.
On the TESG front, Permian assets maintain low carbon intensity based on zero routing flaring. Methane monitoring continues at production facilities, along with other practices, such as tankless storage facilities, to reduce emissions at the source. Please continue to the next slide. For the Midstream segment, transported volumes increased year-on-year by nearly 20,000 barrels per day, primarily as a result of higher crude oil production in the Llanos region, greater availability of both refineries as well as operational optimizations in the refined product transport systems. So far this year, 10 reversal cycles have been carried out in the Centenario pipeline, ensuring the evacuation of production from the Cano Limon field. Likewise, an alternative route was implemented to evacuate condensed crude from Gibraltar and unloaded -- station as a heavy crude diluent.
The bottle making production of approximately 30 million cubic feet of gas in the Gibraltar field. During the second quarter, Senate continued to perform a cabotage operation from the Buenaventura Maritime terminal to the Tumaco terminal. Supplying part of the demand of products in this region of the country affected by restrictions on the Pan American Highway in line with our TESG strategy after three years of work led by Ocensa in partnership with Oleoducto de los Llanos Orientales, ODL, Oleoducto Bicentenario Colombia, OBC, and other regional entities, we highlight the completion of the Vida Manglar project, which restored and rehabilitated 39.2 hectares of mine growth in the Cispata Bay in Cordova, contributing to the natural regeneration of the area.
Finally, the Ministry of Mines and Energy through the issuance of Resolution 279 of 2023, temporarily suspended the updating of crude oil transport tariffs that takes place in July of each year. Therefore, the current tariffs will remain enforce until the tariffs for the following period are set in accordance with the terms, established by the regular. Let's continue with the next slide, please. In the Downstream segment, the Cartagena refinery achieved a record quarterly throughput of 209,000 barrels per day, thanks to the continuous operation of the Cartagena crude oil plant interconnection project, IPCC, by its acronym in Spanish, as well as the high operational availability of the plants. During the quarter, we reached an integrated throughput of 427,800 barrels per day, a 17% increase versus the same period in 2022.
In line with our commitment to contribute to the improvement of Air quality in Colombian and deliver cleaner fuels stand out the record production of diesel, gasoline, and jet fuel for local supply in compliance with resolution 40103 that establishes the fuel content limits for Columbia. In 2Q 2023, we reached an integrated refining gross margin of $14.4 per barrel as a result of higher refinery throughput with plant availability levels surpassing 96%. Compared to 1Q 2023, the margin was mainly affected by a contraction in global demand reflected in lower diesel and jet fuel prices and higher crude oil prices. By the end of the year, margins are expected to remain at the double-digit level. In addition, scheduled maintenance will be carried out at both refineries during the second half of the year, ensuring the reliability and integrity of our operations.
During the quarter we made progress in achieving various milestones of which I would like to emphasize, start maturation of the project to produce sustainable aviation fuels and renewable diesel in the Barrancabermeja refinery contributing to the carbonizing aviation sector. The start-up of the electrolyzer project in Esenttia that aims to generate hydrogen from water using solar panels as an energy source to partially cover the operation's self-consumption. The execution of the 5G technology Barrancabermeja refinery with the aim of implementing industrial technology solutions in the operation which will enable efficiencies in maintenance and operation processes. We continue to advance on the zero-fuel oil path initiating production of AC-30 quality asphalt of Barrancabermeja refinery, those opening up new market opportunities.
Let's move on the next slide please. During the first half of the year, efficiencies of COP1.6 trillion were achieved, of which COP1.1 trillion contributed to mitigate the inflationary effects that continue to impact the cost and expenses. On this front, I would like to highlight the multiple initiatives that have allowed us to optimize dilution and evacuation costs of heavy, and extra-heavy crude oil. The implementation of production strategies that have contributed to reducing lifting costs, as well as energy efficiency strategies with the use of technology solutions and self-generation listing cost as of June 2023, amounted to $9.41 per barrel, a year-on-year increase of $0.13 per barrel, mainly attributed to inflationary effects on energy targets, well services, and chemical treatment whose impact was mitigated due to achieve deficiencies of $0.24 per barrel.
Refining cash cost decreased by 14% compared to the first half of 2022, explained by increased throughput and exchange rate variance, offsetting higher costs from greater operating activity and inflationary effects. The cost per barrel transported as of June 2023 was $2.76 per barrel, which remains stable versus the same period of 2022, primarily due to the aggregate effect of higher operating costs, a greater average, the evaluation of the COP against the U.S. dollar, and additional volume transported. The total unit cost as of June, 2023 reached $45.6 per barrel a 14.7% decline compared to the same period of the previous year, mainly resulting from the effect of a higher exchange rate and an increasing traded volume. It should be noted that there was a COP700 per dollar year-on-year increase in the average exchange rate in this period, which resulted in an impact of approximately COP340 billion in operating costs and expenses.
I now give the floor back to our CEO, Ricardo Roa.
Ricardo Roa: Thanks, Alberto. The Transmission & Toll road business line generated positive operating and financial results in the first half of the year. These results were primarily sustained by the energy business in Brazil and Colombia and Toll roads in Chile. This record in a 10% contribution by the business line to the group's revenues, 16% input to EBITDA, and 8% participation in net income for the first half of the year. They are mostly driven milestone for the quarter include. The allocation of two logs awarded in the energy transmission by the Brazilian National Electric Agency, as well as six extension in Brazil and one connection in Colombia. Startup of the UPME 07, 2017 Sabanalarga-Bolivar project, an inception of the SmartValves operation in the Santa Marta substation supporting reliability and the connection of renewable energies.
This project will represent additional revenues of $10 million. ISA continues advising in the construction of 34 energy transmission projects, which represent the addition of 4,825 kilometers of transmission lines to the network and will generate revenues of approximately $260 million when they enter in operation. Finally, progress continues in the execution of additional works Ruta de los Rios and Ruta de la Araucania concessions which we generate new revenues and extend the terms of these concessions. I would like highlight that in this first half of 2023, Ecopetrol demonstrate exceptional resilience and solid operational capabilities within a challenging landscape. This was achieved through hard work indication, as well as years of support and commitment by every member of our organization.
To the devotion of our team worldwide and productivity to recognize strategic opportunities, we continue to ensure sustainable growth with a historical execution of the investment plan. In Colombia from the production fields in the [indiscernible] palace to the offshore stations in the Caribbean, and globally from Chile through our Transmission & Toll roads business line to our trading company in Singapore. We will continue to focus on delivering operational excellence, innovation, and commitment to the energy transition. With great enthusiasm, we invite you to celebrate with us in September the 15th anniversary of our listing on the New York Stock Exchange. We will hold an event to share our achievements, financial results, and prospects, and the path to our 2040 strategy.
Finally, I wish to attend all our employees and investor partners for their continued support, and to all of you who participated in this call conference today. Thank you for your time. I now open the floor for the questions.
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