Colombia's Ecopetrol Posts Quarterly Results

  • In the first quarter of 2009, oil and gas production increased by 6.3%; sales volume increased 16.2%.
  • Non-consolidated net income for the first quarter of 2009 reached COP$ 1,609.26 billion, or COP$ 39.76 per share. Consolidated net income for the same period reached COP$ 1,608.44 billion
  • Cash and investments at March 31, 2009 reached COP$ 11,555.6 billion.
  • The Company made several strategic acquisitions amounting to US$ 1,997 million.

Results for the first quarter of 2009 compared to results for the first quarter of 2008

Ecopetrol, S.A. (BVC: ECOPETROL; NYSE: EC), the Colombian integrated natural gas and oil company, announced today its non-consolidated and consolidated non-audited financial results for the first quarter of 2009. Financial statements were prepared and submitted in accordance with the Public Accountancy System (Regimen de Contabilidad Publica, RCP) issued by the National Accounting Office (Contaduria General de la Nacion) of Colombia, in Colombian pesos (COP$).

"During the first quarter of 2009, Ecopetrol successfully implemented on its investment plan. In terms of operations, we increased our production and our sales volumes. As a result, we had a positive operating margin, despite a sharp decline in crude oil and natural gas prices," said Javier G. Gutierrez, Company President.

"Furthermore, the strength of our balance sheet allowed us to make significant acquisitions that are key to the achievement of our strategic goals. These transactions, together with our competitive capacity to obtain blocks in national and international rounds, have increased the scope of our operations and helped strengthen our long-term growth," added Mr. Gutierrez.

Market Environment

The first quarter of 2009 was marked by a worsening of the world's economic recession, with a strong impact on the fundamentals of commodities that pushed down their prices.

The Colombian economy grew at a lower rate, and the balance of payments' current account fell sharply as a result of low commodity prices and less trade operations with Ecuador, the United States, and Venezuela. The persistent crisis in the United States' financial sector and the risk aversion pushed investors to seek shelter in lower-risk assets, which contributed to the devaluation of the exchange rate in Colombia.

These trends began to revert towards the end of the quarter with the beginning of the recovery of the WTI price - which reached a maximum quotation of US$ 54,34/Bl by the end of March -, and with the revaluation of the exchange rate, which went down from an average of 2,512.34 COP$/US$ in February 2009 to 2,469.43 COP$/US$ in March 2009.
During the first quarter of 2009, the total sales volume increased by 16.2% compared to the first quarter of 2008, mainly due to the 78.8 thousand barrels of oil equivalent per day (MBOED) growth in exports. The products that increased its exported volume were natural gas to Venezuela and heavy crude oils.

Regarding heavy crude oils, Castilla Blend rose from an export volume of 82.8 thousand barrels of oil per day (MBOD) in the first quarter of 2008 to 160.6 MBOD during the first quarter of 2009, offsetting the reduction in Vasconia oil exports which decreased from 30.1 MBOD in the first quarter of 2008 to 3.9 MBOD in the same quarter of 2009.

Domestic sales grew by 4 MBOED, mainly due to a 10.5 MBOD increase in crude oil sales to Sociedad Refineria de Cartagena S.A., which helped offset the 2.3 MBOD decline in gasoline sales. Such reduction was due to the beginning of the distribution in the supply plants of the country's southwestern region of the 10% ethanol mix as of March 1, 2009, the lower consumption of liquid fuels resulting from the restrictions of the use of vehicles during the execution of infrastructure works in Bogota (extension of the "Pico y Placa" vehicle circulation restriction, daily from 6 A.M. to 8 P.M.), as well as the growing use of natural gas vehicles (ngv) driven by high gasoline prices within the domestic market.

In spite of the increase in ngv demand, natural gas consumption felt by 4.9 MBOED due to lower natural gas consumption for industry and electricity generation.


By March 2009, Ecopetrol had drilled 3 exploratory wells in directly operated and joint-venture fields, one in the Catatumbo Basin, one in Putumayo (Quriyana-1, producer), and the other in the Llanos Basin. One well is being drilled in the Gulf of Mexico, while drilling at another has been suspended due to damages caused by the latest hurricane season. The commercial exploratory success index during the first quarter of 2009 reached 33%.

Ecopetrol acquired - directly and through joint ventures -- 714.9 kilometers of seismic, while its partners acquired 285 kilometers, reaching a total of 1,000 kilometers. No seismic has been acquired abroad.

Below is a summary of exploration highlights during the first quarter of 2009:

  • January 21: Ecopetrol and Pacific Rubiales report an oil-producing well in Meta Department
  • Both companies announced that the Quifa-5 well, located within the department of Meta, produced surface hydrocarbons. The well was drilled by Meta Petroleum LTD., which operates the Quifa partnership agreement.
  • February 5: Ecopetrol increased its share in offshore blocks in Fuerte Norte and Fuerte Sur
  • Ecopetrol S.A. and BHP Billiton Petroleum Corporation, through its Colombian subsidiary, signed an agreement to increase Ecopetrol's share in the Fuerte Norte and Fuerte Sur blocks. According to the terms and conditions of the contract, BHP Billiton assigned Ecopetrol 25% of its participation in both blocks. As a result, each company has 50% interest in the blocks.
  • March 17: Ecopetrol and Petrobras signed hydrocarbon exploration and production agreements in Peru
  • Through its branch in Peru, Ecopetrol signed two agreements with Petrobras Energia del Peru S.A. to acquire shares in two exploration and production blocks in Peru. Ecopetrol acquired a share of 50% in the first block (Lot 110) and of 25% in the second one (Lot 117).
  • March 19: Ecopetrol submitted the best proposals for 26 blocks in the Gulf of Mexico (US)

Ecopetrol S.A., through its branch Ecopetrol America Inc., submitted the most competitive proposals for 26 blocks, with a 100% share in 15 of them. The Company made a joint proposal together with Repsol E&P USA Inc for the remaining 11 blocks, where its interest ranges from 40% to 60%.


The Company participated in the drilling of 142 development wells during the first quarter of 2009, 33 by Ecopetrol, and the remaining 109 in joint ventures. 127 development wells were drilled during the first quarter of 2008, 33 by Ecopetrol, and the remaining 94 with partners.

Gross equivalent natural gas and oil production rose 6.3%, from 431 MBOED in the first quarter of 2008 (347.4 MBOD of crude oil and 83.6 MBOED of natural gas) to 457.7 MBOED (375.7 MBOD of crude oil and 82 MBOED of natural gas) in the first quarter of 2009.

The increase was achieved mainly in the production of heavy crudes: the Rubiales field increased its Ecopetrol-owned production from 15 MBOD during the first quarter of 2008 to 29.5 MBOD in the first quarter of 2009. Direct operation in the Apiay and Castilla area fields rose from 89 MBOD in the first quarter of 2008 to 103 MBOD in the first quarter of 2009.

Other fields that contributed to production growth during the first quarter of 2009 with respect to the same period in 2008 were La Cira and Casabe (the former from 7.8 MBOD to 11.3 MBOD, and the latter from 9.4 MBOD to 12 MBOD), despite the floods and heavy rainfall in the Magdalena Medio area.

In the first quarter of 2009, production was affected by a community protest in the Putumayo region that bore no relation to Company operations, but which cut down production in the area from 7.6 MBOD during the first quarter of 2008 to 5.1 MBOD in the first quarter of 2009.

Ecopetrol's international assets (K2 and Petro-tech Peruana) contributed with an additional production of 6.2 MBOED during this same quarter, which is not included in the aforementioned production of Ecopetrol.

Lifting costs for the first quarter of 2009 declined to US$ 5.44 /Bl, in comparison with US$ 5.51/Bl in the first quarter of 2008, resulting from a combination of higher production activity, higher costs in workover and related services, offset by a positive impact of exchange rate during the first quarter of 2009.

Strategic Developments

E&P acquisitions

Ecopetrol's exploration and production strategy is focused on the production of one million barrels of oil equivalent per day by 2015. To reach this, the Company works on three fronts: developing current fields, finding new reserves, and acquiring national and international reserves.

Within this context, the following transactions took place in the first quarter of 2009:

Offshore International Group

With the joint acquisition of the Offshore International Group in equal parts by KNOC and Ecopetrol for US$ 900 million plus US$ 92 million in working capital, the Company acquired one of the exploration and production companies with the longest track record in Peru (Petro-tech Peruana) and its companies that provide maritime services in the northern coast of Peru, renowned for their experience in shallow water offshore operation, which contributes 12 MBOD, of which 50% corresponds to Ecopetrol (6 MBOD).
2P (proven + probable) total reserves estimated by Ecopetrol are 112 million equivalent barrels, of which 85 million correspond to 1P reserves. 50% of this corresponds to Ecopetrol.

Furthermore, Petro-tech Peruana has valuable exploratory resource potential, with 11 shallow-water blocks in Peru (1 in production and 10 in exploration stages), which comprised the third largest offshore surface in South America (9.5 million hectares).

Ecopetrol and KNOC's preliminary estimates are of annual average investments of US $250 million for the next 10 years. Current production level could be doubled by the end of this year, and future production increases will depend mainly on the results of the exploratory activity.