Last Friday Ecopetrol announced its financial results and despite the spin – “second best profits in history” – they were in fact down from 2011. Consolidated Net Income was down 4.4% over 2011 and the chart shows this was not caused by accounting, foreign exchange or other easier to rationalize explanations. These non-cash items actually improved results since Operating Income was down 6.4% and EBITDA down 3.2%: it was operations that sunk the ship. And this despite a 4.4% increase in consolidated revenues and a 4.1% increase in crude oil production. The only hero in this story is Exploration and Production which produces almost all of the profits and even it saw margin declines in 2012. Most of the other businesses Ecopetrol is involved with do not. If this were a normal company, institutional shareholders would be screaming to break it up.
A couple of weeks ago we published a variation of this graph based on the production guidance that Canacol published at that time. Canacol being Canacol the picture was not crystal clear and so we made some assumptions to fill in the blanks. Now with 4Q12 results, the picture is not perfect but it is clearer. The principal assumption that we made was that Ecuador would have what the company calls Non-Tariff production i.e. not Tariff which is their word for what amounts to an oil services contract to operate a well for a set fee per barrel. It is now clear that that is not the case and Ecuador will be only an oil services contract which the company says is higher margin than their Colombian contract.
This chart is pretty simple but then Talisman has never really reported much data on its Colombian operations, relegating it to an “includes Colombia” comment under its international operations. But this has changed over the past five or six months since Hal Kvisle was appointed CEO. The country went from being one of the company’s assets with a “For Sale” sign around its neck to being not exactly core but certainly off the auction block and meriting its own chapter in Talisman’s recently published 4Q12 results.
Business newspaper Portafolio.co reports that according Luis Pacheco, Pacific Rubiales Planning vice president, the company could reach US$3.9B revenue in 2012; this after royalties and payments to partners. In this way the company would achieve a 14.7% increase over 2011 figures. Pacheco made these statements during the conference Colombia Genera, of the ANDI.
Minority shareholders of Ecopetrol proposed Roberto Steiner Sampedro as an independent member of the company’s board. Steiner will be included for the position in the ninth row of the sheet that the Ministry of Finance will submit to the General Assembly of Shareholders. To this end, the minority shareholders submitted a “Shareholders’ Agreement” signed by representatives of seven pension funds.
Interoil has been telling the market they are getting out of Colombia for several months now. Yesterday they announced the sale of their exploration assets to Trayectoria Oil and Gas. Interoil says they received US$2M in cash for its working interest in the Altair and COR-6 blocks and avoided US$26M in exploration costs. The transaction is subject to approval by creditors and the ANH. Their working interest in the producing block LLA-47 is still on the market.
Gran Tierra recently issued a press release on its reserves for year-end 2012. The good news is that the company’s Colombian oil reserves 2P (Proved and Probable) are up 34% over 2011. Proved (P1) reserves are up 22% and Probable (P2) are up 85%. The bad news is that Colombian 2P gas reserves are down 64% although Proved gas reserves are only down 35%. Gas now represents only 5% of the company’s Colombian 2P reserves. Argentina gas reserves have also declined but the growth in oil in Colombia, Argentina and Brazil is sufficient to push 1P reserves up 20% and 2P reserves 15% on a total company basis. The official long-form filing may not appear until the end of this month and the company gave no explanation of the decline in gas reserves in its press release.
As reported by newspaper Portafolio, a delegation of UK Export Finance, the United Kingdom’s Export Credit Agency, visited Colombia in order to explore possible investments in the country in the areas of infrastructure, mining, oil and gas. The agency also provides financing services to Colombian companies that want to purchase equipment from British companies.
An Argentinian Justice ratified the foreclosure of US$19B against Chevron for causing environmental damage in Ecuador’s Amazon. The plaintiffs’ lawyer, Pablo Fajardo, said that Chevron “has to pay or deposit (in a bank account in favor of the plaintiffs), each month, 40% of all its revenues in Argentina”. The plaintiffs claim to have been victims of contamination caused by Texaco, later acquired by Chevron, between 1964 and 1990.
The Ecuadorian state-owned oil company is in Bogotá looking for partners to develop three blocks in that country from the Southeast Round. Canacol is one Colombian-focused oil and gas company that has property in the country. Now Petroamazonas wants more. From a Ecuadorian government news agency report, translated and with commentary by Hydrocarbons Colombia.
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