Ecopetrol Reveals 4Q:21 and YE:21 Results

(Ecopetrol, 1.Mar.2022) — Ecopetrol S.A. (BVC: ECOPETROL;NYSE: EC) announced the Ecopetrol Group´s financial results for the fourth quarter and year end for 2021, prepared in accordance with the International Financial Reporting Standards applicable in Colombia.

The financial information included in this report has been audited and is expressed in billions of Colombian pesos (COP), or US dollars (USD), or thousands of barrels of oil equivalent per day (mboed) or tons, as noted. For presentation purposes, certain figures in this report were rounded to the nearest decimal place.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

“At the Ecopetrol Group we seek to attain long-term business competitiveness and sustainability. Accordingly, we have made significant progress during 2021 by consolidating our position as a leading energy and infrastructure group in Latin America, supported by our acquisition of ISA.

The Ecopetrol Group’s resilience, its ability to adapt to external impacts, the effort and drive of its more than 18,000 employees, and the coordinated work with diverse actors across the chain allowed us to guarantee the domestic fuel supply, swiftly responding promptly to an increase in demand of more than 25% with respect to pre-pandemic levels. We increased our domestic gas supply, overcoming the supply crisis, weather-related infrastructure issues, and the public order situation that affected our country during the second quarter of the year.

This February we launched our 2040 strategy, named “Energy that Transforms”. Our long-term goals, mapped in the strategy, include consolidating the Ecopetrol Group as a flexible, agile and dynamic organization, capable of rapidly adapting to constant change and the global challenges of a world striving to accelerate the generation and use of clean energy; while continue to pursue profitable growth and sustainable leadership in the Americas.

I am pleased to share the results of our Competitive Returns strategic pillar, which has enabled us to achieve annual consolidated revenues of COP 91.7 trillion, an 83.4% increase as compared to 2020; net income of COP 16.7 trillion, and EBITDA of COP 42.0 trillion (EBITDA margin of 46%), all record high results that allowed us to obtain a return on average capital employed (ROACE) of 13.6%. Fourth-quarter results were also exceptional: our consolidated revenue amounted to COP 31.8 trillion, net income of COP 6.1 trillion, and EBITDA of COP 14.0 trillion with an EBITDA margin of 44%, showcasing better results in 2021 than those years with better average crude prices.

In our Growth with the Energy Transition strategic pillar, we progressed on multiple fronts. Our reserve balance reached 2,002 million barrels of oil equivalent, an increase of 13% in comparison to 2020. For each barrel produced this year, we added two barrels to our reserves, reaching a reserves replacement ratio of 200%, the highest in the last 12 years. The average reserve life increased to 8.7 years, reflecting the Company’s remarkable management, even surpassing levels reached in the past.  Gas represented 28% of total reserve balance and reported an average life of 10.4 years.

In exploration, we drilled 13 wells in conjunction with our partners, exceeding the annual target of 9 wells set for 2021. Annual production from exploration assets included 65% derived from oil and 35% from gas. Domestically, in the 2021 Colombia Round, Ecopetrol S.A. was awarded three blocks in the Mid-Magdalena Valley basin, one in the Llanos Orientales basin, and – through Hocol – one in the Sinú San Jacinto basin.

In 2021 we reached an average production of 679 mboed, evidencing a recovery trend and closing the year with production for the quarter reaching 695 mboed. Within the Group’s total production, crude share increased to 79% favored by the successful drilling campaign in the Permian, where we achieved a cumulative number of 132 drilled wells and an operational peak production above 50 mboed, well beyond our expectations.

During 2021 natural gas and GLP production represented 21% of the Group´s total production, driven by the increase seen in supply in the year, reaching a combined EBITDA margin of 53%.

Regarding Unconventional Reservoirs in Colombia, we filed to ANLA the Environmental Impact Assessment for the Integral Investigation Pilot Project Kalé and moved forward in preparing the respective study for the Platero project, which was recently filed in February of this year.

In the Midstream segment, total volumes transported during the year reached 1,007 mbd, leveraged on economic recovery, with an increase of 20% in multipurpose pipelines.

In the Downstream segment, the positive trend seen throughout 2021 allowed us to close the year with a consolidated throughput of 354 mbd and a combined annual gross margin of 10.2 USD/Bl, and a record in the fourth quarter of 12.5 USD/Bl. The outstanding annual results, with record EBITDA for the segment, were supported on our operational stability in the refineries, the recovery of liquid fuel demand and its margins, Esenttia‘s historic record results and the segment´s operating cost stability across all business lines.

In the commercial front, we highlight the increase from 34 USD/Bl in 2020 to 67 USD/Bl in 2021 in our crude oil basket realization price, illustrating the success of our strategy to diversify into other export destinations and to strengthen our relationship with clients. Today, the Asian market is our main export destination representing 57% of all exports.

The quarterly results for the Energy Transmission and Toll roads segment, with ISA’s results included in the Group’s fourth quarter consolidated results, amounted to COP 3.1 trillion in revenues, 0.6 trillion in net income and 16% of the EBITDA for the quarter. Some of the highlights of this last quarter for the energy business include the award of the 1,415 km high voltage direct current transmission project with a capacity of 3,000 MW at 600 kV in Chile, a project that will connect the north of the country with the metropolitan area, and the adjudication of the first large-scale energy storage project in Brazil. In the toll roads business, we highlight the completion of the construction stage and start of operations of of 100% of the 4G Cartagena-Barranquilla project.

In our Generate Value Through TESG pillar, the following advances were made:

In the environmental front, in terms of relevant decarbonization developments established the net-zero carbon emissions goal for Scopes 1 and 2 by 2050, as well as reducing by 50% our total emissions (Scopes 1, 2 and 3) by that same year. In line with these achievements, we are pleased with the progress made in renewable energy projects, with: i) the entry into operation of the San Fernando solar park with a capacity of 61 MW in October 2021, making us the largest self-generator of renewable energy in the country; and, ii) the assignment of the construction and start-up of two additional solar parks with a capacity of 66 MW, increasing total renewable capacity to 178 MW.

Consistent with our decarbonization strategy, in December we sold our first shipment of 1.0 mmbls of carbon compensated crude from Castilla Blend® to Asia, offsetting the carbon emitted in dilution, production and transportation by purchasing 32,000 carbon Verra certified carbon credits. 

In 2021 we recorded a positive progress towards our goal to achieve water neutrality, with the reusage of 74% of the water that we require in our operations. We constantly seek a balance between the water required to operate and taking actions that reduce the water footprint and counteract its impact through conservation projects.

In an effort to mitigate climate change, contribute to the protection of flora and fauna, and support the sustainable development of the territories in which we operate, the Ecopetrol Group designated nine additional eco-reserves, reaching a total of 15 zones that will contribute towards the protection of our country’s biodiversity.

Another important milestone was achieved with the awarding of Carbon Neutral certifications by the Colombian Institute of Technical Standards and Certification (Icontec) to our subsidiaries Cenit, Oleoducto de los Llanos and Oleoducto Bicentenario.

In the social front, for 2021, the Ecopetrol Group allocated social investment resources of COP 469 billion to strategic and legal investments. Additionally, investments through the “Works in lieu of Taxes” mechanism reached COP 232 billion allocated through 28 projects completed by year end, including the provision of educational facilities in 18 municipalities in Casanare and Putumayo. Social investment promoted local development to improve quality of life, thus helping to support high levels of trust in the areas in which we operate. These investments seek to boost the dynamics of local economies, promote education and access to public services.

Additionally, in our efforts to encourage economic reactivation and guarantee better living conditions for millions of Colombian families, Ecopetrol initiated a 6-month reduction of 30% in the price of LPG, a fuel used in many homes across remote areas of our country. During 2021, we installed 6.132 new connections of social gas, advancing in our objective of delivering gas to more Colombian families in vulnerable conditions.

On the corporate governance front, during the fourth quarter, Ecopetrol joined the “30% Club” (Colombia chapter), which promotes an increase in the participation of females on boards of directors and management positions in the business sector. The percentage of female participation on the boards of directors of the Ecopetrol Group increased from 18% in 2020 to 22% in 2021. Additionally, the Guidelines for the Boards of Directors of the Ecopetrol Group were updated to take account of the incorporation of new business lines, and to established the succession guidelines for Ecopetrol´s board members and its CEO. For its part, ISA and Ecopetrol were awarded the Equipares Labor Equity Seal for its commitment to implementing measures that seek gender equality.

Regarding the Cutting-edge Knowledge pillar, during 2021 we made significant progress in the Digital Transformation front, specifically in terms of digital reinvention, through a strategic portfolio that captures value and infuses innovation into each one of our processes, exceeding the capture of planned benefits, with compliance close to 137% equivalent to USD 93 million.

This year’s results allow us to begin 2022 in a solid financial position with a favorable pricing environment, a scenario that sets us on positive position to achieve the targets of the 22-24 Plan and provides better options to execute certain milestones included in the framework of our 2040 Strategy. We will continue to challenge ourselves, evolve and move further towards an integrated hydrocarbon chain, as well as towards decarbonization, electrification and diversification”.