News and AnalysIs for

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.

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.

Business magazine Dinero reports that Ecopetrol agreed to finance in pesos US$1B of its US$2B investment budget for this year, after the government recently requested the company to finance its operations in local currency instead of dollars (as we reported). The announcement was made by Minminas Mauricio Cardenas, who said that the projects will be funded: “The vast majority, over 50%, hopefully more than 60%, will be in local currency.”

Multiple sources in the Colombian news media reported that Ecopetrol awarded business group Empresas Públicas de Medellín (EPM) a contract to build, maintain and operate two power lines that will transport electricity to the Barrancabermeja refinery. In the coming days, EPM will begin environmental procedures for the construction project, which will have a 230,000-volt substation and 250-MW-capacity lines 10-kilometers long .

It was a slow news week for the Colombian petroleum workers union (USO). The only item was this one about the USO taking up the environmental cause against Ecopetrol. Forgive our cynicism but we doubt if the USO has suddenly to the cause of clean water. More likely they are looking for leverage on some other issue or it is part of a broader strategy to disconnect the industry from the community. The irony of course is that MinMinas Federico Renjifo went to the same area within the past few weeks and praised Ecopetrol’s environmental management.

National business newspaper Portafolio reports that the State Council (a superior court that decides on government-related cases) ruled in favor of Ecopetrol in a lawsuit in which 56 individuals sued the company for US$239M claiming ownership of the Cuisiana and Cupiagua fields subsoil. Ecopetrol provisioned the money in the mid-nineties while resolving the lawsuit, so now, after the ruling, it will be returned to the company and will be used on investments.

National business paper Portafolio reports that Ecopetrol is preparing an analysis of the delivery date and costs of the Cartagena Refinery (Reficar) enlargement. Initially the company approved a US$4.9B budget; however, costs could exceed th US$5B. Ecopetrol expects to complete four of the fourteen units that make up the enlargement this year, which will become operational only when the entire set is ready, as the units are part of a complete refinement cycle.

This is the latest in a steam of announcements by the state-owned oil company about new patents coming out of their R&D group. From an Ecopetrol press release, translated and with commentary by Hydrocarbons Colombia.

Ecopetrol guarantees that all diesel fuel from January 1st, 2013 will have only 50ppm sulfur. From an Ecopetrol press release with comments by Hydrocarbons Colombia.

National business magazine Portafolio reported that Enrique Velasquez, Ecopetrol Exploration VP, said that, while in 2010 the company’s oil, condensate and natural gas reserves were 1714 Mboe, in 2011 they totaled 1857 Mboe, an 8.3% increase. In 2011, the reserve replacement ratio was 164%. However, it is important to note that 2011 reserves report did not include the two previous years’ findings. Velasquez said that these reserves will be enough for 8.4 years.