Ecopetrol Corporate Group Announces Its Results for the Second Quarter and the First Half of 2015
August 05, 2015 at 21:00 PM EDT
BOGOTA, Colombia, Aug. 5, 2015 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC; TSX: ECP) announced today Ecopetrol Corporate Group's financial results for the second quarter and the first half of 2015, prepared and filed in Colombian pesos (COP$) and on the basis of International Financial Reporting Standards (IFRS).
According to Article 3 of Decree 2784 of December 28, 2012, the application date of the new technical framework is December 31, 2015, therefore, the financial information presented prior to this date is subject to adjustments.
As indicated in paragraphs 9 and 18 of International Accounting Standard 27 "Consolidated and Separated Financial Statements," Ecopetrol and its Corporate Group must present their financial information on a consolidated basis, combining the financial statements of the parent company and its subsidiaries line by line, adding assets, liabilities, shareholder's equity, revenues and expenses of a similar nature, removing the reciprocal items between the Corporate Group and recognizing the non-controlling interest.
The financial results in this report are not comparable line by line with the previously issued financial results for the second quarter of 2014, which were prepared in accordance with the Public Accounting Regime (Regimen de Contabilidad Publica) as adopted by the Colombian National Accounting Office. For the sake of comparison, the financial results that were already reported in the second quarter of 2014 are presented in this report under IFRS.
Some figures in this release are presented in U.S. dollars (US$) as indicated. The exhibits in the main body of this report have been rounded to one decimal. Figures expressed in billions of COP$ are equal to COP$1 thousand million.
Table 1: Summary of the Group's Consolidated Financial Results
In the opinion of Ecopetrol's CEO Juan Carlos Echeverry G.:
"Ecopetrol is disciplined with its costs adjustment program, aimed to gain efficiencies in different areas. Thus, we have already obtained savings of COP$0.6 trillion. These savings are mainly the result of renegotiations with our contractors. We have solidified our long term relationship; our allies understand that the current circumstances call for extraordinary actions, and the mutual commitment to mitigate the effects of this scenario of low oil prices.
The Barrancabermeja refinery is now more efficient, thanks to the operation of the new turbo gas unit, which will translate into efficiencies in the energy generation cycle and a lower emission of greenhouse effect gases of 200 thousand tons equivalent per year. We also improved the cost of drilling by lowering the average number of days required by well, in Castilla and Chichimene fields, from 34 days in 2014 to 28 in 2015.
Facing a challenging oil price scenario, the Company is adopting the adjustments required, based on its recently announced strategy, to continue searching for efficient and profitable barrels.
In our transformation plan we identified 630 initiatives throughout the Company, aiming at savings of COP$ 1.4 trillion in 2015. We are promoting ethic and transparency in our purchase and contracting processes, and investment projects.
We continue to prioritize the lives of people and workers, the well-being of the communities in which we operate and the environment. The accident frequency index in Ecopetrol was reduced by 38% between the second quarter of 2014 and the same period of 2015, from 0.77 to 0.49 accidents per million hours of labor, reflecting improved labor conditions.
On another front, Ecopetrol was subject of an irrational wave of attacks against our transportation infrastructure in June, in some provinces located next to Venezuela and Ecuador´s borders. The Company demonstrated, once again, its capacity to face the crisis by deploying 500 workers to stop the leakage in the Mira River and do all the cleaning tasks necessary to mitigate the damage caused.
In the finance area, this quarter was better than the previous due to the growth trend shown by crude and product prices, while the exchange rate, which holds a negative correlation to these, reversed part of the trend toward devaluation shown in the first quarter. This was achieved despite the deterioration in environment conditions around June of this year, stemming from attacks on transport infrastructure, which as we have repeatedly said, not only affected operations but caused irreparable damages to the environment and surrounding communities.
Production in the second quarter reached 768 thousand barrels equivalent a day, in line with the goal of 760 thousand barrels equivalent a day, announced for 2015, representing an increase of 5% compared to production in the second quarter of 2014. This was the result of the opening of new facilities and the new drilling campaigns in the fields Castilla and Chichimene, as well as the normal operation of Cano Limon field throughout most of the quarter.
In exploration, drilling continued on the well Kronos, located offshore in the southern Caribbean (operated 50-50 by Anadarko in partnership with Ecopetrol), and drilling began on the well Sea Eagle in the U.S. Gulf of Mexico (operated by Murphy, 35%; Petrovietnam, 15%; and Ecopetrol America Inc, 50%). In July, Kronos well confirmed the presence of gas in ultra-deep waters. The discovery proves the geological model proposed for an unexplored area, with high hydrocarbon potential.
The refining margin of the Barrancabermeja refinery was 17.20 US$ per barrel in second quarter 2015, 58% more than in the same period of 2014 (10.9 US$ per barrel). This was the result of better prices of refined products compared to crude and the higher yield of medium distillates.
The volume of crude transported in the second quarter of 2015 declined by 4% compared to the first quarter of this year, due to the increased number of attacks on transport infrastructure, with 2 in the first quarter and 44 in the second, 36 of these in the month of June. Compared to the second quarter of 2014, volume transported increased by 7.8%.
In our commercial activity, in line with our strategy of diversifying the destination of our products, we exported to South Korea and the U.S. East coast. Also, with the purpose of increasing our footprint in the Asian market, we announced our first shipment of crude to Japan, following the conclusion of negotiations with the company JX Nippon, which bought 2 million barrels of Castilla crude to supply its refining systems.
The improved financial result in the second quarter of 2015 compared to the first quarter of 2015 is the outcome of better crude realization prices, which increased from 43 US$ per barrel in the first quarter to 53 US$ per barrel in the second. Although cost of sales showed an increase of 10% compared to the first quarter, given the higher costs of maintenance, purchases and product imports, when compared to the same period of 2014 we had a reduction of 11%, reflecting the cost optimization strategies that are gradually beginning to materialize. In line with this, we achieved a 2.32 US$ per barrel reduction of our lifting cost, as a result of optimizations, between the second quarter of 2015 and the same period of 2014.
Our operating expenditures continued under control. Although in the first quarter of 2015 we recorded the applicable wealth tax for year 2015, in the second quarter of 2015 financial expenses were also reduced due to a lower impact of the exchange rate difference.
Thus, in the second quarter of 2015, the Corporate Group's net revenue, attributable to Ecopetrol shareholders, was COP$1.5 trillion pesos, compared to COP$0.16 trillion in the first quarter of 2015 and COP$2.6 trillion in the second quarter of 2014.
On another note, this past May 26, we announced to the market our new 2015-2020 strategy, aimed at profitable growth in exploration and production and maximization of efficiencies in transport and refining.
The strategy prioritizes value over volume, with emphasis on financial discipline, streamlining investments and divestment of non-strategic assets. The plan also foresees profound transformations within the organization, both in the business segments as well as in project management, technology, environment relations and investment portfolio management.
One month after launching our strategy, we successfully placed bonds in the international market for US$1,5 billion, with an 11-year term and 3 times oversubscribed. The issue demonstrated, once again, the appetite and confidence of institutional investors in our company.
Also during the quarter, the risk rating agencies Fitch Ratings, Standard & Poor's Ratings Services and Moody's Investors Service, confirmed Ecopetrol's ratings of BBB, BBB and Baa2, respectively, all with stable outlook, providing us the support needed to continue with our strategic plans as an investment grade issuer in the international capital market.
We remain focused on generating value for our stakeholders and we work every day to generate clean, profitable barrels."
The complete report is available in www.ecopetrol.com.co
Ecopetrol is the largest company in Colombia and is an integrated oil and gas company; it is among the top 40 oil companies in the world and among the top four oil companies in Latin America. Besides Colombia – where it generates over 60% of the national production – it has exploration and production activities in Brazil, Peru, and the US (Gulf of Mexico). Ecopetrol owns the largest refinery in Colombia, most of the pipeline and multi-product pipeline network in the country, and is significantly increasing its participation in bio-fuels.
This release contains statements that may be considered forward looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. All forward-looking statements, whether made in this release or in future filings or press releases or orally, address matters that involve risks and uncertainties, including in respect of the Company's prospects for growth and its ongoing access to capital to fund the Company's business plan, among others. Consequently, changes in the following factors, among others, could cause actual results to differ materially from those included in the forward-looking statements: market prices of oil and gas, our exploration and production activities, market conditions, applicable regulations, the exchange rate, Ecopetrol's competitiveness and the performance of Colombia's economy and industry, to mention a few. We do not intend, and do not assume any obligation to update these forward-looking statements.
For further information, please contact:
Head of Corporate Finance and Investor Relations (a)
Maria Catalina Escobar
Media Relations (Colombia)
 Net income attributable to Ecopetrol's shareholders under IFRS.
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SOURCE Ecopetrol S.A.