News and AnalysIs for

The graph shows Operating Income Margins (averaged over the previous four quarters) fell in 3Q12 for all companies except Suroco and have been falling for two quarters except for Suroco and Parex. The companies shown are the largest producers who are specialized in Colombia and who publish sufficient financial detail for us to do the calculation. The trailing four quarter average (MA 4) smooths out some of the variation but does not do justice to Gran Tierra which has actually had rising margins this year but these are lower than the corresponding quarters in 2011.

Chilean oil and gas company GeoPark produced its first set of quarterly results for the nine-months ending September 2012. The company says it plans to produce quarterly results from this point forward. In 2012, GeoPark acquired Colombian producers Winchester, La Luna and Hupecol all of which contributed to a nearly 50% year-over-year increase in oil and gas production and a 147% increase in revenue. The company produces gas in Chile but with the new Colombian assets its revenues from oil have climbed to 87% of total.

The most important issue in the USO report this week is an action by Pacific Rubiales transport workers for better pay and working conditions. The National Transport Workers Union (SNTT for its initials in Spanish) wants to recruit more workers to the cause and then pressure the company for meal allowances, housing and education subsidies. Most of the company’s crude is transported by pipeline but it still needs tanker trucks especially for diluents. Other companies would be far more affected if relations with drivers became confrontational. We estimate 61,000bd of crude are transported by truck, just from the department of Meta.

Incidents were up 38% again this week to 69 – the highest level we have ever recorded. This sent our 4-week Moving Average up 36% and it now sits at 44 incidents per week, back where it was at the beginning of December last year although still down from a peak of 58 back in October.

Our readers do not need to go through the long and dreadful story of the Paramo of Santurbán, the country’s biggest gold deposit. In short, environmentalists have long been fighting the development of this area and when science failed to confirm that the entire mountain needed to be protected, they went the political route and had the area declared a park. This left many companies with mining concessions “high-and-dry”.Ecogold – formerly known as Greystar – had apparently sunk over US$450M in developing its property which was at the center of the firestorm. Now government officials are confused about what comes next.

Business newspaper La Republica reports that the mining and energy locomotive is slowing its advance due to terrorist attacks. In July 2012 the Cerrejon suffered seven attacks while Ecopetrol reported 49 to September of the same year. This caused sector goals in 2012 to not be fully met. “Without doubt the reported attacks influenced the outcome of mining GDP, which slowed last year,” said María Constanza García, National Mining Agency (ANM) president.

This week, MinHacienda Mauricio Cardenas went to the World Economic Forum at Davos, Switzerland to sell the Colombian success story. Earlier in the week he told Bloomberg he was not looking for foreign direct investment but was looking to sell the country’s bonds. From a MinHacienda press release, translated and with comments by Hydrocarbons Colombia.

We have not published these statistics from Campetrol for a while and they are somewhat old considering all the evidence of drilling activity in 4Q12. They do indicate where the action is and the Free / Contract statistics are evidence of availability for those who need equipment (for glass half full types) or perhaps lack of activity (for glass half empty types). Utilization was at 70% in October 2012 versus 83% in November 2011. (Note that our numbers vary somewhat from Campetrol’s figures. See the Methodological Note at the bottom of the article.)

Local news site NoticiasdeVillavicencio.com reports that inhabitants of the municipality of Cumaral (Meta) denounced that cracks in the area’s mountains have appeared due to oil companies’ seismic work.. The environment secretary of Villavicencio, Nelson Vivas Mora, said it is important to protect the rights and interests of the Cumaral residents.

In an interview with Cali newspaper El Pais, the economist Salomon Kalmanovitz spoke about, among other things, the recent tax reform, mining and oil. According Kalmanovitz the reform was not made in depth. He said: “It was mostly tax cuts and the increase was a congressional initiative and not of the government: a one point in the income tax rate from 33 to 34%”.