Transportadora de Gas del Sur ("tgs", "the Company", “us”, “our”, or “we”) is the leader in Argentina in the transportation of natural gas, transporting approximately 60% of the gas consumed in the country, through more than 5,700 miles of gas pipelines, with a firm-contracted capacity of 2.9 Bcf/d. We are one of the main natural gas processors. In addition, our infrastructure investments in Vaca Muerta formation is a milestone with the aim of becoming one of the main Midstreamers at Vaca Muerta.
Our shares are traded on NYSE (New York Stock Exchange) and BYMA (Bolsas y Mercados Argentinos S.A.).
Our controlling company is Compañía de Inversiones de Energía S.A. ("CIESA"), which owns 51% of the total share capital. CIESA’s shareholders are: (i) Pampa Energía S.A. with 50%, (ii) Grupo Investor Petroquímica S.L. (member of the GIP group, led by the Sielecki family) and PCT L.L.C. hold the remaining 50%.
For further information, see our website www.tgs.com.ar
Stock Information
BYMA Symbol: TGSU2
NYSE Symbol: TGS (1 ADS = 5 ordinary shares)
Shareholding structure as of September 30, 2021
tgs holds 794,495,283 issued shares and 752,761,058 outstanding shares.
Buenos Aires, Argentina, November 8, 2021
During the 3Q2021, total comprehensive income amounted to Ps. 4,415 million, or Ps. 5.86 per share (Ps. 29.32 per ADS), compared to total comprehensive income of Ps. 593 million, or Ps. 0.78 per share (Ps. 3.91 per ADS) for the third quarter ended on September 30, 2020 (3Q2020).
Operating profit for 3Q2021 amounted to Ps. 5,147 million, a decrease of Ps. 3,127 million compared to 3Q2020. This variation was mainly due to:
ØLower revenues from the Natural Gas Transportation segment of Ps. 2,439 million due to lack of tariffs adjustment since April 2019;
ØOperating costs and administrative and commercialization expenses, excluding depreciation, increased by Ps. 1,435 million compared to 3Q2020, which were
Øpartially offset by higher revenues from the Other Services and Production and Commercialization of Natural Gas Liquids (Liquids) segments amounting Ps. 583 million and Ps. 231 million, respectively,
Financial results recorded a positive variation of Ps. 7,001 million.
3Q 2021 EARNINGS RELEASE
3Q2021 highlights
ØIn September we completed the expansion of the Tratayén plant, which will allow us to increase the natural gas gathering capacity in the Vaca Muerta area, and thus, increase capacity for our midstream services. This investment of approximately US$16 million. Oscar Sardi our Chief Executive Officer said: "In spite of the many difficulties presented by the pandemic, we continued working to develop energy solutions in our country. This expansion further consolidates our position as a leading company in the provision of midstream services in Neuquén, and reinforces our decision to assist our clients with creative solutions throughout all the links of the natural gas value chain".
ØDuring September 2021, we repurchased our own notes for a nominal value of US$ 1,500,000.
COVID-19 and the measures adopted
Within the sanitary emergency established by the Presidential Decree No. 167/2021, and which expires until December 31, 2021, in 3Q2021, the Presidential Decree No. 494/2021 was implemented (in force until October 1, 2021), and established the "epidemiological traffic light" to allow provincial authorities to define the pertinent restrictions to preserve the sanitary situation at their provinces.
These measures resulted in the need to readapt our operations once again in order to continue providing our services and executing the essential works at the facilities.
Currently, the Presidential Decree No. 678/2021 is in force from October 1, 2021 to December 31,2021. This decree introduces relaxations of some prevention measures previously taken. The mandatory use of face masks in open spaces was abolished and social gatherings, economic, industrial, commercial, service, religious, cultural and sports activities are authorized without restrictions (in the latter case with a 50% capacity for events gathering over 1,000 people).
Considering our current financial position and measures taken previously, we estimate that we will have sufficient resources to meet current working capital needs, finance capital expenditures and pay off short-term financial debt obligations without incurring in any additional debt.
Despite the aforementioned measures, the extent and duration of these developments remains uncertain and could impact the operating results, cash flow and financial condition; however, it will depend on the severity of the health emergency and the success measures adopted by the government thus far as well as any future ones.
Analysis of the results
Total revenues added to Ps. 17,963 million in 3Q2021, a Ps. 1,625 million decrease compared to Ps. 19,588 million in 3Q2020.
Transportadora de Gas del Sur S.A. 3
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
The breakdown of operating costs, administrative and commercialization expenses, excluding depreciation, for 3Q2021 and 3Q2020 is shown below:
Operating costs and administrative and selling expenses, excluding depreciation, increased by approximately Ps. 1,435 million in 3Q2021 compared to 3Q2020. This variation is mainly explained by higher: (i) natural gas processing costs (higher prices denominated in US dollars, partially offset by the inflation restatement effect in accordance with IAS 29 - "Financial Reporting in Hyperinflationary Economies" ("IAS 29")), (ii) operating costs, and (iii) taxes, fees and contributions (due to higher export taxes, which were partially offset by a lower turnover tax).
Financial results are presented in gross terms considering the effects of change in the currency purchasing power ("Gain on monetary position") in a single separate line. In 3Q2021, financial results recorded a positive variation of Ps. 7,001 million compared to 3Q2020. This variation is mainly due to the gain recorded in 3Q2021 related to the change in the fair value of financial assets, in comparison with the loss recorded in 3Q2020 and the lower negative exchange difference (as a consequence of the lower net liability position in foreign currency during 3Q2021 and the lower devaluation of the Argentine peso against the US dollar). These effects were partially offset by the lower gain on monetary position results, due to the effect of the lower net monetary liability position, and the loss recorded from the repurchase of notes.
Transportadora de Gas del Sur S.A. 4
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Analysis of operating profit by business segment
Natural Gas Transportation
Operating profit before depreciation of the Natural Gas Transportation segment decreased by Ps. 2,588 million.
Natural gas transportation revenues accounted for approximately 29% and 39% of total revenues in 3Q2021 and 3Q2020, respectively.
Revenues from this segment derive mainly from firm natural gas transportation contracts, which represented approximately 81% and 83%, respectively, of the total revenues of this segment in 3Q2021 and 3Q2020.
Transportadora de Gas del Sur S.A. 5
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Natural Gas Transportation Operational information
This business segment, subject to ENARGAS regulation, received its last tariff adjustement on April 1st, 2019, following Resolution No. 192/2019.
The decrease in operating profit was mainly related to lower revenues given the lack of a tariff adjustment to compensate for the negative variation associated with the inflation restatement effect under IAS 29.
Liquids Production and Commercialization
Liquids Production and Commercialization revenues accounted for approximately 59% and 53% of total revenues in 3Q2021 and 3Q2020, respectively. During 3Q2021, production reached 287,647 short tons (38,322 short tons below 3Q2020).
Operating profit before depreciation in this business segment in 3Q2021 was Ps. 912 million below 3Q2020, reaching Ps. 3,134 million (compared to Ps. 4,046 million recorded in 3Q2020). This variation stems from higher natural gas processing costs of Ps. 786 million (mainly due to the effect of the higher U.S. dollar-denominated price), and higher export withholding tax charge of Ps. 173 million.
Transportadora de Gas del Sur S.A. 6
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Liquids revenues were Ps. 10,585 million in 3Q2021, Ps. 231 million higher than 3Q2020. This was mainly due to higher international reference prices for natural gasoline and LPG amounting to Ps. 2,769 million, combined with the increase in the nominal variation of the exchange rate in U.S. dollar-denominated revenues of Ps. 1,800 million, and the increase in ethane price of Ps. 1,139 million.
These effects were partially offset by the impact of the IAS 29 restatement of Ps. 3,657 million,
and the lower volumes dispatched amounting to Ps. 2,158 million.
Total volumes dispatched recorded a decrease of 25%, or 88,339 short tons, compared to 3Q2020, mainly due to lower quantities of LPG exported (as a consequence of the significant volume shipped in 3Q2021 due to the higher availability of natural gas for processing) and the lower short tons of ethane shipped to PBB Polisur S.R.L. as a consequence of the client's inability to take the product.
The breakdown of volumes dispatched by market and product and revenues by market is included below:
Other Services and Telecommunications
This business segment mainly includes services such as midstream and telecommunications, representing approximately 12% and 8% of our total revenues in 3Q2021 and 3Q2020, respectively.
Operating profit before depreciation increased by Ps. 404 million (or 37%) mainly as a result of a Ps. 583 million increase in revenues in 3Q2021, which was partially offset by an increase in operating costs of Ps. 183 million.
The increase in revenues was mainly due to: (i) higher natural gas transportation and conditioning services at Vaca Muerta area amounting to Ps. 555 million, (ii) the nominal effect of the exchange rate on U.S. dollar-denominated revenues of Ps. 259 million, and (iii) more natural gas compression services of Ps. 143 million. These effects were partially offset by the impact of IAS 29 restatement of Ps. 581 million.
Transportadora de Gas del Sur S.A. 7
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Financial position analysis
Net debt
As of September 30, 2021, our net debt amounted to Ps. 17,917 million compared to Ps. 31,936 million as of December 31, 2020 (in both cases, net of the repurchased notes). Our total net financial debt is denominated in US dollars for both dates and is shown in Argentine pesos in the table below.
The table below shows a reconciliation of our net debt:
Liquidity and capital resources
The net variation in cash and cash equivalents for 3Q2021 and 3Q2020 was as follows:
Below is a reconciliation of the free cash flows for the 3Q2021 and 3Q2020:
Transportadora de Gas del Sur S.A. 8
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
During 3Q2021, cash flow generated by the operating activities amounted to Ps. 4,380 million, Ps. 8,100 million below 3Q2020, mainly due to a working capital increase and higher income tax payment.
Cash flow used in investing activities amounted to Ps. 4,253 million in 3Q2021, compared to Ps. 19,010 million in 3Q2020, mainly due to lower acquisition of financial assets not considered cash equivalents made during 3Q2021. In addition, payments for PPE acquisition increased by Ps. 50 million.
Finally, cash flow used for financing activities decreased by Ps. 248 million. During 3Q2020, Ps. 527 million in treasury shares were repurchased (no repurchases were made in 3Q2021). Similarly, Ps. 279 million of notes were repurchased in 3Q2021 and none in the same 2020 period.
3Q2021 earnings videoconference
We invite you to participate in the videoconference to discuss this 3Q2021 announcement on Tuesday November 9, 2021 at 09:00 a.m. Eastern Time / 11:00 a.m. Buenos Aires time.
In order for those interested in participating in our earnings videoconference, there will be a live webcast that you can access at:
https://us02web.zoom.us/webinar/register/WN_4E2y9aomRbyVdtxdUCorCA.
This press release includes forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended. Forward-looking statements are based on management’s current views and assumptions and involve known and unknown risks. Although the Company has made reasonable efforts to ensure that the information and assumptions on which these statements and projections are based are current, reasonable and complete, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations contained in this release. Neither the Company nor its management can guarantee that anticipated future results will be achieved. Investors should refer to the Company’s filings with the U.S. Securities and Exchange Commission for a description of important factors that may affect actual results.
Rounding: Certain figures included in this press release have been rounded for ease of presentation. Percentage figures included in this press release have not, in all cases, been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this press release may vary from those obtained by performing the same calculations using the figures in our Financial Statements. Certain numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them due to rounding.
Transportadora de Gas del Sur S.A. 9
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 10
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 11
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 12
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
3Q 2021 EARNINGS RELEASE
Transportadora de Gas del Sur S.A. 13
3672 Don Bosco St. (1206), Autonomous City of Buenos Aires, Argentina.
https://www.tgs.com.ar/investors/Press-releases
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Transportadora de Gas del Sur S.A.
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By:
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/s/Alejandro M. Basso
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Name:
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Alejandro M. Basso
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Title:
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Vice President of Administration, Finance and Services
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By:
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/s/Hernán Diego Flores Gómez
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Name:
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Hernán Diego Flores Gómez
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Title:
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Legal Affairs Vice president
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Date: November 8, 2021