Colombian state-owned oil company Ecopetrol SA plans to invest $60 billion by 2015 to boost production, reserves and refining capacity, among other projects, Chief Executive Javier Gutierrez told reporters Thursday.
Ecopetrol plans to invest $38 billion in exploration and production during the period and will spend the rest in downstream and corporate activities, Gutierrez said. The company's previous investment plan, released earlier this month, was $17 billion between 2008 and 2011.
"The amount is spectacular," Juan Dauder, a stock analyst with the local brokerage Interbolsa SA. "It's an aggressive bet, they plan to boost reserves and there is no other way than exploration and acquiring other oil companies."
Dauder said the oil industry is all about risks. "But the companies that found the most oil are the ones that spent the most," he said.
Ecopetrol will finance the investment plan with a combination of its own cash flow, debt and the sale of new shares, he said.
So far, the company has virtually no debt, so it has a great capacity to finance itself on the markets.
And as for cash flow, Ecopetrol expects to report a net profit of 5.2 trillion Colombian pesos ($2.72 billion) in 2007, its highest profit ever reported. Ecopetrol benefited from high oil prices and a slight increase in production.
Dauder and other analysts said the company's net profit guidance already takes into account a significant amount set aside to finance investments.
Last year, Ecopetrol raised $2.8 billion from the stock market from the sale of a 10.1% stake in an initial public offering. The company, which is still 89.9% controlled by the government, was authorized by the Colombian Congress to float as much as 20% of its capital on the stock market.
As part of its 2008-2015 investment plan, Ecopetrol plans to invest $3.8 billion in 2008, up from $1.7 billion in the previous year. The company had originally planned to spend $2.07 billion in 2007, but fell short.
About 50% of the amount to be invested in 2008 will be spent in its production activities and 19% in exploration.
Thanks to the investment to be carried out, Ecopetrol plans to boost its production to 1 million barrels of oil equivalent per day in 2015 from a forecast 425,000 barrels a day in 2008 and 399,000 barrels a day registered in 2007.
Gutierrez said about 70% of that production would come from Colombia, while the remaining 30% would be pumped up in other countries. Currently, Ecopetrol only produces oil in Colombia.
"Our plan is to become a global company. We may look for projects in Africa or in Asia," Gutierrez said.
To achieve the production increase, the company needs to add an average of 390 million barrels of new reserves a year until 2015. Of that amount, the company will buy an average of 80 million in reserves from other companies.
"A good option would be to take over other smaller oil companies," Dauder said.
Ecopetrol currently seeks oil in Brazil, Peru and the Gulf of Mexico.
The shares of Ecopetrol on the local stock market fell 0.5% to COP1,950, while the IGBC stock index ended up 0.3% at 9,479.13 points.Copyright (c) 2008 Dow Jones & Company, Inc.
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