Ecopetrol Group Announces Its Results for the First Quarter of 2016
May 03, 2016 at 19:06 PM EDT
BOGOTA, Colombia, May 3, 2016 /PRNewswire/ --
Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) ("Ecopetrol" or the "Company") announced today Ecopetrol Group's financial results for the first quarter of 2016, prepared and filed in Colombian pesos (COP$) and under International Financial Reporting Standards (IFRS) applicable in Colombia.
Table 1: Summary of the Group's Consolidated Financial Results
In the view of the President of Ecopetrol S.A., Juan Carlos Echeverry G.:
"The price environment in the first quarter of 2016 continued to defy the oil industry, which saw the value of crude reach US$28/barrel, a 12 year record low. Ecopetrol, however, managed to generate profits amid this challenging environment, focusing its efforts on reducing costs, increasing efficiency, producing profitable barrels and prioritizing cash generation.
During the first quarter of 2016 the price of Ecopetrol´s crude basket fell 43% and its refining margin fell 24% in comparison to those of the same period of 2015. The actions undertaken to operate more efficiently and with lower costs, coupled with the positive impact of the devaluation of the exchange rate over our revenues and the recording of a lower financial net loss allowed to register a growth of 127% in net profit attributable to shareholders and to improve the EBITDA margin compared to those of the first quarter of 2015. Additionally, the Company maintained its operating margins and EBITDA at approximately COP$4,000 billion compared to the same quarter.
Savings in costs and expenses contributed to the obtained results, these amounted to COP$421 billion in the first quarter of the year, against a target of COP$1,600 billion for all 2016. The efficiencies are mainly due to the optimization of purchasing and contracting plans, better procurement strategies and renegotiation of contracts.
The reduction of the lifting cost, cash cost of refining and transportation costs, reported in the first quarter of 2016, compared to the same period last year, are a result of the progress made by the company pursuant to the Transformation Plan, the devaluation of the COP/USD exchange rate and austerity and activity reduction measures implemented in all business segments. Ecopetrol is working so that the obtained efficiencies become structural even in an environment of increasing prices in order to ensure profitable operations and financial sustainability.
The adjustments in CAPEX and OPEX implemented since 2015, in line with lower oil prices and the strategic prioritization of value over volume led to programmed lower activity and lower production in the first quarter of 2016, which came to 737 thousand barrels equivalent per day, compared to 773 thousand in the first quarter of 2015. This fall also reflects the natural decline and the temporary closure of some fields caused by low profitability or judicial decisions. Once market conditions and cash availability improve, the Company expects to increase levels of investment in exploration and production and give way to investments that have been postponed in this low crude oil price environment.
In exploration, the deep water appraisal well Leon 2 in the Gulf of Mexico of the United States was completed. This one is operated by Repsol, which holds a 60% stake. The remaining 40% belongs to Ecopetrol America Inc. The Company is awaiting the results of the evaluation of the information provided by the well, located in one of the regions with the greatest potential for hydrocarbons in deep waters in the world.
Between the first quarter of 2015 and 2016 the gross margin of the refining segment decreased by US$4.5 per barrel mainly as a result of market conditions marked by lower spreads between prices of middle distillates and the price of oil.
The Cartagena refinery continued its boot and stabilization process, obtaining a regular operation of the delayed coking, catalytic cracking and diesel hydro-treaters units. As of March 31, 28 units of a total of 34 were operational. It is expected that all units in the complex will be in full operation by the second half of 2016. Additionally, loads of crude up to 140 thousand barrels of oil a day have been achieved.
Test of high viscosity crude transportation were started in February 2016. Satisfactory results were obtained moving oil with a viscosity of 405 centistokes (cSt). This project, along with the expansion of capacity in Ocensa (P-135) will reduce the cost of dilution which is key to the production of heavy crudes, which today represent about 58% of the total production of the Group.
In December 2015 the Company imposed a significant cut on its 2016 investments compared to the levels of previous years with the approval of a budget of US$4,800 million. The need to preserve the financial sustainability of the Company with the low oil prices environment prompted a further cut in the investment plan for 2016, which now will range between US$3,000 and US$3,400 million. The expected production was adjusted to this new reality from 755 thousand barrels per day to approximately 715 thousand barrels of oil equivalent per day.
2016 is a transition year for the Ecopetrol Group during which the cycle of investments in Midstream and Downstream will conclude with some transport projects and the startup of the Cartagena refinery. From 2017 on the Company will devote a greater proportion of its investments to Upstream.
Financing needs for this year are in the US$1,500 - US$1,900 million range, without taking into account the resources that may be obtained from the Company´s divestment plan. To date, US$475 million has already been obtained through credit facilities with local and international banks.
Cash flow was also leveraged by the results of the auction of Ecopetrol´s stake in ISA held in April 2016, which allowed allotting shares in the amount of COP$377 billion.
Shareholders also contributed to the financial strengthening of the Company with the decision not to distribute dividends in 2016, which was made during the last general meeting of shareholders.
Operational excellence, focus on capital discipline, rationalization of investments and rotation of the portfolio of assets to generate cash flow have enabled Ecopetrol to successfully navigate the current price environment.
Ecopetrol continues to position itself for the future by strengthening its portfolio of exploration and production in order to seize opportunities that may be generated in the next cycle of higher crude oil prices. In this way we can ensure growth in the long term, financial sustainability and value creation for Ecopetrol."
The complete report is available in www.ecopetrol.com.co
Ecopetrol is the largest company in Colombia and is an integrated oil & gas company; it is among the top 50 oil companies in the world and among the four top ones in Latin America. Besides Colombia - where it generates over 60% of the national production - it has exploration and production activities in Brazil, Peru & the US (Gulf of Mexico). Ecopetrol owns the largest refinery in Colombia and 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 & gas, our exploration and production activities, market conditions, applicable regulations, the exchange rate, the Company'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
Media Relations (Colombia)
 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. All financial information in this report is unaudited.
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SOURCE Ecopetrol S.A.