Moody’s Ecopetrol Review

(Moody’s, 21.Nov.2019) — Moody’s Investors Service (“Moody’s”) has completed a periodic review of the ratings of Ecopetrol S.A. and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody’s reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody’s practice has been to issue a press release following each periodic review to announce its completion.

This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Key rating considerations are summarized below:

Ecopetrol S.A.’s (Ecopetrol) Baa3 ratings and ba1 Baseline Credit Assessment, which reflects a government-related company’s intrinsic risk regardless of support considerations, are based on its leading position as oil and gas producer in Colombia; its strong standalone credit profile, characterized by low debt levels relative to capitalization; as well as solid trends for its proved reserves and production. In addition, the company counts with a robust and relatively stable cash flow from its midstream subsidiary Cenit S.A.S., which includes Oleoductro Central S.A. (Ocensa, Baa3 stable). Moody’s assume a high probability of support from the Colombian government (Baa2 stable) as well as moderate default dependence between the two entities, resulting in one-notch uplift to Ecopetrol’s senior unsecured rating. Ecopetrol’s liquidity is good and its refinancing risk is low.

Oleoducto Central’s (Ocensa) Baa3 rating is equal to Ecopetrol’s, based on Moody’s view that Ocensa’s credit profile is closely linked to that of its main shareholder and controlling entity. Ocensa has a low financial leverage and has a leading industry position in Colombia; it also has a strategic importance to Ecopetrol and operates under favorable industry dynamics in Colombia in terms of transportation demand for pipelines. Ocensa’s ratings incorporates its tariff and contract structure that supports solid margins, predictable cash flow and solid balance sheet for its business risk. These factors help offset its exposure as a single asset pipeline, its relatively small scale within the midstream peer group, and a high dividend payout policy.

This document summarizes Moody’s view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.

The principal methodologies used for this review were Integrated Oil & Gas Industry published in September 2019, Government-Related Issuers published in June 2018 and Midstream Energy published in December 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

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