Fixed Income Analysis /
Colombia

Ecopetrol: Best financial results in four years; combination of Buys and Holds on the bonds

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

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    Tellimer Research
    7 November 2018
    Published byTellimer Research

    We now have a mixture of Buys and Holds on Ecopetrol bonds, after Colombia’s main integrated oil and gas entity reported its strongest financial and operational results in four years in 3Q 18, covering the 12 months ending 30 September 2018.

    Due to a substantial recovery in oil prices and the company’s average weighted sale prices of its basket of products, coupled with continuing cost controls and efficiencies, the company generated total sales in Q3 18 of US$6.03bn and EBITDA of US$2.70bn. These figures compared to total sales of US$4.48bn in Q3 17 and EBITDA of US$1.97bn in the period. The results were also helped by increased production, as illustrated by volumes of c716 MBOED (million barrels of oil equivalent per day) during the first 9 months of 2018, which was practically the same as the 717 MBOED of the full year of 2017. The company’s target for full year 2018 is to reach a production volume of 725 MBOED, which given the strong first nine months should be comfortably exceeded.

    During the LTM ended Q3 18, total sales amounted to US$22.28bn, and EBITDA came in at US$10.17bn. These figures compared favourably to the US$18.80bn in sales and the US$7.85bn in EBITDA during 2017.

    Aside from the production volumes mentioned above, the company also showed marked improvements in midstream and downstream activities. Regarding midstream, the company increased its transported volume to 1,103 MBOED in the first nine months of 2018, compared to 1,086 MBOD in the same period a year ago, mainly by optimising some systems and, in terms of downstream, the company’s throughput reached 380,000 barrels of oil per day (producing cleaner fuels thanks to synergies between refineries and operational adjustments to its transportation systems) in Q3 18 compared to 337,000 barrels of oil per day.

    In terms of exploration, Ecopetrol made a light oil discovery in the Andina-1 well and declared the REX-NE field commercially viable. In addition, the company acquired 11,009 square kilometres of 3D seismic property in the Salinas Basin in the Gulf of Mexico.

    In terms of balance sheet and credit metrics, Ecopetrol reported cash of US$2.40bn, short-term debt of US$2.70bn, total debt of US$13.42bn, and leverage of 1.32x. This compared with total debt of US$15.58bn in 2017, which resulted in a leverage ratio of 1.98x.