Colombia’s Ecopetrol Reinvents Itself

Instant Max AI

(Ecopetrol, 26.May.2015) – Ecopetrol S.A.’s Board of Directors approved a new corporate strategy aimed at guaranteeing the company’s long-term sustainability, in which value generation based on efficient barrels and shareholder return become a priority.

Within a complex international price environment, the new strategy defines that Ecopetrol will be focused on oil and gas exploration and production, while seeking operational excellence in transportation, refining and petrochemical areas. The strategy also pursues the achievement of structural efficiencies, to allow the Group to increase its competitive levels in order to reach the best international standards.

In exploration, the Ecopetrol Group will build a portfolio that is robust and diversified, focused on high potential basins in Colombia and abroad, which is designed to increase significantly the Group’s contingent resources and reserves. In addition, the exploratory team based in Houston and Bogota will be strengthened by the addition of world-class human talent with proven track record.

In production, Ecopetrol will be focused on efficient barrels production, in major profitable fields, while carrying out a comprehensive program to increase the recovery factor. It will seek to increase average annual production between 1% and 2%, reaching a total of approximately 870 thousand barrels of oil equivalent per day by 2020, with an EBITDA target of more than $30/bbl in a price scenario for Brent crude of between $70/bbl and $80/bbl.

As for the company’s reserves, the objective is to increase proved reserves by 1,700 million barrels of oil equivalent by 2020.       In the transportation segment, the company will dedicate its efforts to increase efficiency in order to achieve international operating standards. The plan includes Cenit´s consolidation, the affiliate that will ensure the transportation of national crude, with a special focus on heavy crudes, as well as transportation of refined products for the Colombian market.

In refining and petrochemical, the strategy contemplates the start-up of the new Cartagena refinery during the 4Q:15, execution of an ambitious efficiency plan that will improve the competitiveness of existing assets and the promotion of the necessary regulatory conditions to ensure the business’s profitability within a framework of financial selfsustainability.

Ecopetrol will focus on profitable investments, at an average estimated level of $6,000 million per year through 2020, oriented toward high value projects that contribute to the execution of the new strategy.

The company will prioritize the protection of available cash for its operations, maintaining its access to local and international capital markets in competitive conditions. The preservation of business and finance metrics that credit rating agencies consider will be a priority to maintain our current credit rating.

The company will continue its program to divest non-strategic assets, as announced with regard its stake in EEB and ISA, among others, as well as nonstrategic exploration and production assets.

The strategy is based on producing efficient, clean and profitable barrels, which generate returns for our shareholders, interested groups and Colombians. The perspective toward 2020 will be to attempt to double the 2014 return on capital employed.

To support its strategy, in the beginning of 2015, Ecopetrol initiated a transformation plan that provides structural efficiencies to obtain annual savings close to $1,000 million in the period 20152020. This plan contemplates fundamental changes within the company, including its business, project management and technology segments as well as relationship with local communities and active portfolio management.

The plan also provides a cultural transformation that encourages and promotes the attainment of results and is based on the principles of integrity, collaboration and creativity.

Ecopetrol will prioritize innovation and knowledge generation. In the new strategy, technology and information systems will be focused on leveraging key business projects, especially in exploration and production.

The Ecopetrol Group is committed to production with zero accidents and environmental incidents, with a solid regional presence, prompt decisionmaking, with satisfied and committed employees, and a harmonious, mutually beneficial relationship with local communities.

Ecopetrol’s new strategy and the transformation plan that supports it, have as their goal the company’s reinvention in order to successfully compete in a challenging international environment.

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