(Ecopetrol, 14.Aug.2018) – Ecopetrol S.A. announced the Business Group’s financial results for the second quarter and the first half of 2018, prepared in accordance with International Financial Reporting Standards applicable in Colombia.
The figures included in this report are unaudited. Financial information is expressed in billions of Colombian pesos (COP), US dollars (USD), thousands of barrels of oil equivalent per day (mboed) or tons, as noted where applicable. For presentation purposes, certain figures in this report have been rounded to the nearest decimal place.
In words of Felipe Bayón Pardo, CEO of Ecopetrol:
“During the second quarter of 2018, we saw significant operational and financial achievements for the Business Group. We posted an EBITDA margin of 51%, the highest in the business group’s history, and had the highest production of the past seven quarters, at 721,000 barrels of petroleum equivalent per day, up 2.8% from the first quarter of 2018. We were able to take advantage of the favorable environment for crude prices and at the same time confirm our technical, operational and financial capacity and our commitment to safe and environmentally responsible practices.
“Net profit in the first half of 2018 totaled 6.1 trillion pesos, with cumulative EBITDA of 15.8 trillion pesos. This achievement was possible thanks to the optimal operation of the different business segments and the financial discipline of the Group’s companies, combined with better crude prices during the period. At the close of the quarter, we succeeded in maintaining a solid cash position of 15.8 trillion pesos, even after paying out 2 trillion pesos as dividends on 2017 earnings. Risk rating agencies acknowledge our successes and have confirmed our investment-grade credit rating. Indeed, Moody’s upgraded our baseline credit assessment from ba3 to ba1.
“Our commercial strategy, announced in 2015, has succeeded in yielding tangible benefits. In the first half of 2018, we succeeded in maintaining levels close to those of the first half of 2017, even with the 35% increase in the price of Brent crude and challenging environment. For the first half of 2018, the spread on the crude sales basket was -7.7 dollars per barrel, versus -7.5 for the same period in 2017.
“Average production for the quarter totaled 721,000 barrels of oil equivalent per day, some 0.6% above the same period the previous year and 2.8% over the first quarter of 2018. We succeeded in recovering from the operational issues in the first quarter, thanks to the results of the drilling campaign in fields such as La Cira, Rubiales, Caño Sur, Dina, Quifa and Castilla. The increased activity will lead us to the path of growth and ensure meeting our annual production goal at a range of 715,000 to 725,000 barrels of petroleum equivalent per day. On the other hand, the pilot recovery programs are also advancing satisfactorily; currently 21 pilots are in operation, 16 of which are still in the expansion phase.
“In the exploratory campaign, we scored a success during the quarter by confirming the presence of dry gas and light crude at the Bufalo-1 well, in the Valle Medio del Magdalena basin. We have also completed drilling of the Coyote-2 and Coyote-3 appraisal wells, located in the Valle Medio del Magdalena, as well as Capachos Sur-2, located in the Piedemonte. These three wells are undergoing assessment to determine their commercial feasibility. We expect to drill at least 12 exploratory wells in 2018.
“As part of our Near Field Exploration strategy, in late May the Infantas Oriente field in Barrancabermeja (Santander) was declared commercial. This allowed us to incorporate in record time the reserves associated with the Infantas Oriente-1 discovery, the assessment of which was carried out at the start of the year.
“In the transport segment, I would like to note the resumption of operations on the Caño Limón – Coveñas oil pipeline in June and the stability of the transport system for heavy crudes with viscosity greater than 600 centistokes (cst – a measure of viscosity), thereby structurally reducing dilution requirements.
“The reversal strategy implemented since 2017 on the Bicentenario oil pipeline allowed for reducing the impact of the attacks and illegal valves affecting the Caño Limón – Coveñas oil pipeline, preventing deferred production in its surrounding fields. In the first half of 2018, 30 reversal cycles were completed on the Bicentenario oil pipeline.
“The Refining segment saw outstanding operational performance in the second quarter, achieving stable throughput of 374,000 barrels per day.
“In the second quarter of 2018, the Cartagena refinery continued to demonstrate the consolidation and optimization of its operations with average throughput of 153,000 barrels per day and throughput composition of 79% domestic crude and 21% imported crude, thus contributing significantly to reducing the Business Group’s cost of sales. In June, it achieved a record in the use of local crudes, at 83% of its diet. The gross refining margin for the Cartagena refinery during the quarter was USD 11.1/bl, up 44% over the same period the previous year (USD 7.7/bl), thus posting 10 consecutive months with gross margins in the double digits.
“Throughput and production at the Barrancabermeja refinery was up over 9% for the quarter versus the same quarter of 2017, thanks to the implementation of initiatives to segregate light and intermediate crudes, thus increasing their availability. The average refining margin for the quarter was USD 10.5/bl, affected primarily by the increase in the price of the crude basket versus Brent.
“In line with the Business Group’s Efficiencies strategy, in the second quarter of the year we incorporated efficiencies representing 429 billion pesos, up 17% over the second quarter of 2017. Thus, cumulative efficiencies in the first half of 2018 totaled 892 billion pesos, for a total of 8 trillion pesos since the launching of the Transformation Program in 2015.
“In addition to the above, we are particularly proud of our success in implementing operational and logistics adjustments in record time throughout the entire supply chain, in order for diesel deliveries to Medellin and its Metropolitan area to have a sulfur content of below 25 parts per million. This is in line with our commitment to the environment, thus contributing to the improvement of the city’s air quality.
“We have also committed to the massive transportation system Transmilenio S.A. to supply natural gas and B2 diesel with a maximum sulfur content of 10 parts per million for the renovation of the bus fleet of phases I and II, thus enabling the entry of EURO VI technologies.
“Together with the national and local institutions, Ecopetrol will continue to improve the quality of fuels for the whole country as set in the enhancement path established in the CONPES document for the improvement of air quality.
“In order to achieve a significant effect, it is not only necessary to improve fuels, but it is also necessary to carry out other actions such as improving the technology and age of the vehicle fleet, as well as promoting other initiatives related to road maintenance, mobility and the reduction of emissions in fixed sources, among others.
“Ecopetrol remains focused on operational excellence, value creation, a commitment to ethics and transparency, safety as a pillar of its operations and care for the environment. We are committed to profitable growth in production and reserves to deliver results that benefit the company’s sustainability and the country’s energy security.”
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