News and AnalysIs for

Gran Tierra recently published a 1Q13 production update and we thought it illustrative of what many mid-sized companies have been saying, providing an upbeat message to compensate for other down signals.

There were a number of recent articles – of which we pick on ones from La Republica and Dinero from last week – to say that Colombian investors were streaming out of Ecopetrol and into Pacific Rubiales. The reasons were increases in Pacific Rubiales’ production and reserves, flat reserves and concerns about production in 1Q13 for Ecopetrol. All this is true so the logic is impeccable. The graph shows that perhaps investors are not as responsive to this logic as the articles suggests.

Pacific and Ecopetrol have been fighting over an escalation clause in the Quifa contract for over a year now. In late March, the day before Pacific was to publish its 2012 annual results, an arbitration board ruled in favor of Ecopetrol. After weeks of saying that there were legal avenues to be explored and pointing out that the arbitration board specifically stepped away from ordering the company to pay, Pacific now says they will honor the decision.

As reported by Caracol Radio, Congress will discuss the lawsuit between Ecopetrol and Pacific Rubiales for Quifa field exploitation. According to Senator Jorge Enrique Robledo, Pacific cannot refuse to pay Ecopetrol 1.5M oil barrels (equivalent to US$382M), after the Colombian courts ruled in favor of Ecopetrol.

Chilean operator with participation from Korean industrial giant LG has published its first set of annual results after purchasing Winchester Luna and Hupecol in early 2012. From a corporate perspective all of its absolute indicators are up significantly because of success in Chile and the acquisition of significant production in Colombia. However, as the graph shows, EBITDA margins in Colombia are poorer than the Colombian average (which was pulled down by poor results at Canacol) and much poorer than the company’s operations in Chile.

We wrote a few weeks ago that ‘Debt is the new black’ about how Colombian oil and gas companies were using debt rather than equity. At the CWC Oil and Gas Summitt and Exhibition in Cartagena recently, Scotiabank’s Rolf Schmitz gave a good explanation of why there is a strong interest in M&A in Colombia but that companies are using debt rather than equity to finance their activities.

The graph shows the percentage of oil and gas employment which is sourced locally. These survey estimates come the annual Hays “Oil and Gas Global Salary Guide”, a fascinating look into the structure of industry employment. Considering industry comments about finding talent, it is perhaps surprising to see that South America sits in the middle of the chart, with a level of local sourcing ahead of Africa and just behind North America.

The annual Hays “Oil and Gas Global Salary Guide” is always an interesting read, filled with information. This chart shows the average salary for a local worker in the oil and gas industry, the average salary for an imported i.e expat worker and the estimated average (the heavy line). There are lots of questions about sample size and methodology (why, for example, are imported workers to Argentina paid less than locals?) but the data is interesting none-the-less.

The French oil giant Total has had an important investment in Colombia. But its recently published 2012 Annual Report shows that commitment is dwindling and is now quite minor. Having sold its long-time interest in Cuisana to Emerald last October, it is left with participation in exploration block in Niscota and a small piece of the Ocensa pipeline. What would be its next move?

We made somewhat light of Ecopetrol’s announcement in March of a well with just over 200bd production. Now here is another announcement which is 3x the size! This is an improvement but it is still only a 0.1% increase in the company’s production. Like the last announcement, this one got wide coverage in the Colombian press. From an Ecopetrol press release, translated and with commentary by Hydrocarbons Colombia.