Ecopetrol Business Group presents its 2017 fourth-quarter and full-year results
February 27, 2018 at 18:27 PM EST
BOGOTA, Colombia, Feb. 27, 2018 /PRNewswire/ --
Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) announced today the Business Group's 2017 fourth quarter and full-year financial results, in accordance with International Financial Reporting Standards applicable in Colombia.
Figures included in this report were extracted from the audited financial statements and were the source for the calculation of certain financial measures such as the Ebitda. The information is expressed in billions of Colombian pesos (COP) or US dollars (USD), or thousands of barrels of petroleum-equivalent per day (mboed) or tons, and are so noted as applicable. For presentation purposes, certain figures of this report have been rounded to the nearest decimal place.
In the opinion of Ecopetrol S.A. CEO, Felipe Bayon Pardo:
"2017 was a year of great operational and financial success for Ecopetrol. We are a more efficient and disciplined Company, demonstrating our technical capabilities and resilience by emerging stronger from the crisis of low oil prices.
"We are prepared to take advantage of opportunities that may arise. The discipline we have established and a more favorable price environment will allow us to better positioning to continue growing a profitable and safe operation.
"In 2017 we remained focused on seeking excellence and safety in all our operations and meeting our production goals with a better balance of reserves. These are basic foundations for the Company's growth. The rigorous allocation of investment resources, solid cash position and financial indicators, less leverage, a sustained investment-grade rating and the successful culmination of large projects were key aspects to the results we attained.
"We are successfully experiencing Ecopetrol's "profitable growth". Net profit in 2017 totaled 6.6 trillion pesos, the highest in the past four years and some 16% over 2014 profit, even with a Brent price 45% lower. EBITDA and EBITDA margin were 23.1 trillion pesos and 42%, respectively; EBITDA margin was up four percentage points over 2016, and is one of the highest in the global oil and gas industry.
"For the year as a whole, cash break-even was at 40 dollars per barrel.
"We closed out the year with a solid cash position of 14.5 trillion pesos (approximately 4.8 billion dollars), enabling opportunities for future inorganic growth. The 2017 year's cash position allowed us to prepay debt totaling 2.4 billion dollars, which is reflected in a 17% reduction in the Ecopetrol Group's nominal debt, strengthening its capital structure. Our Gross Debt/EBITDA indicator was at 1.9x for 2017, versus 2.9x in 2016.
"Total investment in 2017 totaled 2.2 billion dollars, out of which 80% was allocated to the Exploration and Production segment, in line with our proposed 2020 Business Plan. It is important to note that despite lower investment during the year, the Company met its operating goals.
"We are satisfied with the results achieved with our 2017 certification of reserves, which showed a change of trend. Proven reserves totaled 1,659 million barrels of oil equivalent, average life increased to 7.1 years and reserve replacement index was 126%, the highest in the past three years. This result was broadly leveraged by the success of our program to increase the recovery factor and the ongoing development of our fields.
"As a result of proactive commercial approach and a scarcity of heavy crude worldwide, we succeeded in reducing the crude basket spread by 2.5 dollars per barrel, to -6.9 dollars per barrel, an improvement of some 27% over the 2016 figure. Thanks to this progress, additional revenue of 1.2 trillion pesos was generated for Ecopetrol. Also, in 2017 a new energy marketing subsidiary was incorporated.
"The company met its 2017 production goal, at 715 thousand barrels of oil equivalent per day. This result was possible despite some operational events and public security issues, especially on the Caño Limón Coveñas oil pipeline. An important achievement was to be able to maintain a stable bi-directional operation on the Bicentenario oil pipeline and moving all our heavy crude along the same corridor. In 2017 some 500 development wells were drilled, reflecting a significant increase in activity versus 2016.
"The recovery program saw outstanding results and is continuing to mature toward an expansion phase for pilots that have successfully completed the analysis stage. The purpose of the recovery program is to expand enhanced recovery technologies to other fields, as for example in Chichimene, one of our main fields, which initiated the mature expansion of water-injection technology throughout the entire field, based on the positive results obtained in the pilot phase.
"2017 was a year of intense exploratory activity, as we worked hard to build the foundations for the Company's future growth. We ended the year with a total of 21 wells drilled. Through this deployment of activity we succeeded in incorporating more than 250 million barrels of oil equivalent in contingent resources, leveraging the future increase in the Business Group's reserves.
"It is important to highlight the experience we gain with the drilling of the Molusco-1 well, the first offshore well operated by Ecopetrol. This well ended up fulfilling projected plans with no technical, environmental or operational incidents. Through this project, Ecopetrol has acquired experience in offshore exploration, following the industry's highest HSE standards.
"In line with the strategy of growth and increased international activity, we were awarded new exploratory blocks in Mexico (blocks 6 and 8) and the United States (Garden Banks 77, 78, 121 and 122 in the US Gulf of Mexico). In turn, an additional stake was acquired in block K2 (Gulf of Mexico), contributing to our 2017 reserves and production balance.
"In the transport segment, we highlight the stable transport of heavy crude with viscosity greater than 600 centistokes (cst – a viscosity measurement), thereby reducing dilution requirements. Late 2017 saw the completion of the San Fernando - Monterrey pipeline, the most important infrastructure in the Orinoquia region, providing us greater capacity to transport heavy crudes.
"In refining, we achieved important operational milestones that yielded significant value to the Business Group. We note that in its second year of operations, the new Cartagena refinery is generating positive net profit and EBITDA, marking a significant change of trend in its financial figures. This important asset, which belongs to every Colombian, shows why it is considered the most modern refinery in Latin America.
"The new Cartagena refinery completed its stabilization stage in December 2017 with the execution of the global performance test, having a sustained load of 144 thousand barrels per day or 96% of its capacity during 60 days and a refining margin of 12.5 dollars per barrel in the fourth quarter of 2017. This milestone initiates the operational optimization phase.
"The Barrancabermeja refinery has consolidated a profitable and efficient operation, with an average refining margin of 13.5 dollars per barrel. During the year the Bioenergy project was completed and achieved several technical and operational milestones.
"It is important to highlight that in December we reached an historic peak load of 393 thousand barrels per day on one specific day of the month. These successes were achieved while both refineries were operating stably and optimally.
"The Transformation program remains a critical part of our growth. In 2017 operating efficiencies of 2.6 trillion pesos were reported versus the initial goal of 750 billion pesos. The key efficiency drivers in 2017 were energy, heavy crude handling, sales spread, optimization of the refining segment, and water management.
"Process Safety showed the best results of the past nine years, with a Level 1 Process Safety Incidents Indicator of five incidents, a decline of 17% versus 2015 and 2016. This result was largely due to the implementation of safe practices and the strengthening of leadership in the area, at the management levels.
"With a view to aligning our practices with global standards, Ecopetrol S.A. obtained OHSAS 18001 certification (Occupational Health and Safety) and ISO 14001 certification (Environmental Management), confirming its high HSE standards and enhancing its market competitiveness.
"The year 2018 comes with significant challenges for Ecopetrol. Increasing our production to a level between 715 and 725 thousand barrels of oil equivalent per day, maintaining operational excellence, safety in our operations and solid financial metrics are our priorities. For 2018 we project investment ranging from 3.5 to 4.0 billion dollars, with a major focus on Exploration and Production, which accounts for 85% of the CAPEX plan.
"In the Exploration and Production segment we plan the drilling of over 620 development wells, at least 12 exploratory wells, the use of 28 rigs and the acquisition of over 41,000 kilometers of 2D and 3D seismic. We also project developing activities at some 20 pilot projects to implement improved recovery technologies.
"In the refining segments, efforts are focused on optimizing operations at the new Cartagena refinery, where we forecast an EBITDA of at least 500 billion pesos and a double-digit refining margin. The Company expects to achieve a milestone in refined products, with its two refineries processing between 350 and 375 thousand barrels of oil per day.
"As part of the revision of the Corporate Responsibility strategy, in December 2017 the Corporate Responsibility Office was created, with the purposes of identify, adopt and facilitate the incorporation of initiatives that leverage the achievement of business objectives and ensure Ecopetrol's position as an organization that acts responsibly with its stakeholders.
"The Ecopetrol Group's 2018 priorities will continue to be operational excellence, a commitment to ethics and transparency, safety as a pillar of its operations, care for its workers, protection of the environment, shared growth with communities, within a framework of joint prosperity and safe operations."
To review the full report please visit Ecopetrol's website: www.ecopetrol.com.co
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.
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1 Comparison made against financial results reported under IFRS as adopted in Colombia in 2015
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SOURCE Ecopetrol S.A.