News and AnalysIs for

Peru’s NOC Petroperú has announced it will float 49% of its shares to public markets, opening the state run firm to private capital. What lessons are in this for Ecopetrol (NYSE:EC)?

Investments to meet emissions standards set by the Ministry of Environment and Sustainable development have amounted to a CoP52B (US$26.4M) investment into Ecopetrol’s refinery business, only considering the Barrancabermeja Refinery.

As Ecopetrol (NYSE:EC) shareholders go into today’s Annual Meeting they will probably be concerned about the dividend. They may be calmer than they might have been about the share price since it is up nearly US$5 from late February although still below where it closed at the end of 2013. They might complain about the refinery business. We think they should ask questions about growth.

Ecopetrol (NYSE:EC) invested CoP$1.3T (US$645M) in environmental projects during 2013, which it says is the highest amount dedicated to these ends in the last eight years.

The growing demand for diesel and Colombia’s environmental requirements for the fuel, paired with a limited internal capacity of Ecopetrol (NYSE:EC) to produce this fuel could mean an increase of imports of the fuel by 7.4% in 2014.

The USO has said that it has presented a new list of terms to Ecopetrol (NYSE:EC) which surround a number of policy changes and increased benefits, stances on several environmental issues, and will hold a vote among USO affiliated workers with the NOC on April 25, 2014, in order to demand a new collective bargaining agreement.

Lately Ecopetrol has received much criticism for the slowness of refinery upgrades in Cartagena and Barrancabermeja. The harder question may be why it is investing at all in this business.

Colombian senator Jaíme Durán of the Liberal party has called on the leadership of Ecopetrol (NYSE:EC) to explain to the country in detail why the Barrancabermeja project continues to suffer delays.

Company officials held a call to discuss the end of year 2013 results and convince the market that its continued growth over the last five years is sustainable going forward despite operational complexities.

Ecopetrol (NYSE:EC) saw its production grow 4.5% in full year 2013 to reach 788.2mboed, a number which the NOC said suffered due to transport restrictions and blockades in some communities. The company’s net income fell in the same period by 10.8% to CoP$13.35T.