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Ecopetrol Business Group presents fourth quarter and full-year 2019 Results

BOGOTÁ, Colombia, Feb. 25, 2020 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL;NYSE: EC) announced today the Business Group's 2019 fourth quarter and full-year financial results, prepared in accordance with International Financial Reporting Standards (IFRS) applicable in Colombia.

Ecopetrol Logo. (PRNewsFoto/Ecopetrol S.A.)

TABLE 1:

CONSOLIDATED FINANCIAL RESULTS

ECOPETROL BUSINESS GROUP


Billion (COP)


4Q 2019

4Q 2018

∆ ($)

∆ (%)


12M 2019

12M 2018

∆ ($)

∆ (%)

Total sales


18,581

18,314

267

1.5%


70,847

67,820

3,027

4.5%

Depreciation and amortization


2,101

1,881

220

11.7%


8,290

7,605

685

9.0%

Variable cost


7,547

7,412

135

1.8%


27,176

24,774

2,402

9.7%

Fixed cost


2,622

2,649

(27)

(1.0%)


9,492

8,791

701

8.0%

Cost of sales


12,270

11,942

328

2.7%


44,958

41,170

3,788

9.2%

Gross income


6,311

6,372

(61)

(1.0%)


25,889

26,650

(761)

(2.9%)

Operating and exploratory expenses


771

1,382

(611)

(44.2%)


3,726

4,592

(866)

(18.9%)

Operating income


5,540

4,990

550

11.0%


22,163

22,058

105

0.5%

Financial income (loss)


(245)

(300)

55

(18.3%)


(1,670)

(2,010)

340

(16.9%)

Share of profit of companies


65

(84)

149

(177.4%)


354

155

199

128.4%

Income before income tax


5,360

4,606

754

16.4%


20,847

20,203

644

3.2%

Income tax


247

(1,297)

1,544

(119.0%)


(5,067)

(7,415)

2,348

(31.7%)

Net income consolidated


5,607

3,309

2,298

69.4%


15,780

12,788

2,992

23.4%

Non-controlling interest


(318)

(296)

(22)

7.4%


(1,251)

(978)

(273)

27.9%

Net income attributable to owners of Ecopetrol before impairment


5,289

3,013

2,276

75.5%


14,529

11,810

2,719

23.0%

Impairment


(1,751)

(496)

(1,255)

253.0%


(1,748)

(347)

(1,401)

403.7%

Deferred tax of impairment


471

130

341

262.3%


470

93

377

405.4%

Net income attributable to owners of Ecopetrol


4,009

2,647

1,362

51.5%


13,251

11,556

1,695

14.7%












EBITDA


7,174

7,042

132

1.9%


31,108

30,798

310

1.0%

EBITDA Margin


38.6%

38.5%

-

0.1%


43.9%

45.4%

-

(1.5%)

The figures included in this report were extracted from the audited financial statements. The financial information is expressed in billions of Colombian pesos (COP) or US dollars (USD), or thousands of barrels of oil 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 words of Felipe Bayón Pardo, CEO of Ecopetrol:

"2019 was an outstanding year for the Ecopetrol group, both operationally and financially, reaching the targets we set in the 2019-2021 Plan update. Our financial results were the highest of the past six years, with a net profit of COP 13.3 trillion, an EBITDA of COP 31.1 trillion and an EBITDA margin of 44%. This performance allowed for the highest dividend payment in the Company's history (COP 314  per share), as well as investments focused on  profitable organic (80%) and inorganic (20%) growth totalling USD 4.4 billion, maintaining our credit rating.  The Gross Debt-to-EBITDA ratio was 1.2 times in 2019.

The financial results achieved demonstrate the positive operational performance and the positioning of our crudes in markets that generate greater value, reaching in the fourth quarter 2019 a record differential in the crude basket of -4.7 USD/bl. Our sales and marketing strategy enabled us to establish a direct relationship with refiners, strengthening our position as a reliable heavy crude supplier for our customers, with high quality standards and competitive delivery times, thus maximizing the value of our basket amidst a favorable market context for heavy crudes in the region.  These favorable performance was further facilitated by to a better average exchange rate, savings in financial expenses from debt prepayments and a lower nominal tax rate. The foregoing allowed to offset the lower average Brent price, which declined from USD 72 USD/bl in 2018, to 64 USD/bl in 2019, showing our ability to face a challenging environment, reflected in a lower net income breakeven of 29.9 USD/bl.

2019 net profit was positively impacted as a result of our increased stake in Inversiones de Gases de Colombia (Invercolsa) from 43% to 52%, pursuant to the Supreme Court ruling of October 2019, whereby our interest position changed, and this Company thus ceased to be a subsidiary and became an associate, generating a non-recurring income in the amount of COP 1.0 trillion.

As part of our corporate strategy, we remain committed to our operational and financial efficiency plan. During 2019, Ecopetrol Group's cumulative efficiencies amounted to COP 3.3 trillion, a 22% increase versus 2018 and exceeded the target set in the 2019-2021 Plan. Based on our efficiency roadmap, USD 126 million of the 2020 plan were allocated to Digital Transformation, which will allow improved productivity and efficiency through the implementation of artificial intelligence, blockchains and bots, among other technologies.

In operational terms, during 2019, we incorporated 408 million barrels of oil equivalent (mboe) in proven reserves, furthering the positive trend of 2017 and 2018. At the end of the year, the proven net reserves of the Ecopetrol Group reached 1,893 million barrels of oil equivalent. The reserves replacement ratio was 169%, the highest of the past nine years, despite a 15% lower Brent price versus 2018. Furthermore, average life of total reserves increased from 7.2 to 7.8 years.

Organically, 100% of reserve replacement was achieved, emphasizing the outstanding performance of primary, secondary and tertiary recovery. The joint venture with Oxy allowed Ecopetrol to incorporate 164 mboe of proven reserves (1P).

In exploration, the Group and its partners completed the drilling of 20 wells, thus exceeding the 12-well goal set for the year. We had a geological success rate of 40% with eight (8) successful wells.

Near-Field Exploration strategy has been noteworthy, allowing for short cycle reserves addition given their location near production facilities. This strategy succeeded in adding over one million cumulative barrels of crude in extensive tests, which were tallied to the production of the Business Group.

An important milestone for the development of the Colombian offshore was the agreement signed between Ecopetrol S.A. and Shell, whereby Shell will acquire a 50% stake in the Fuerte Sur, Purple Angel and COL-5 blocks, located in deepwater Caribbean Sea offshore Colombia.

In the production front, we met the annual goal, reaching 725 thousand barrels of oil equivalent per day, despite operational incidents and public order difficulties faced during the year. Production increase leveraged on the positive drilling results and increased gas sales and marketing. In October, the entry into operation of the LPG Plant of the Cupiagua field was a remarkable event, with an expected production of between 7,000 and 8,000 barrels daily, thus escalating national supply of this energy and providing thousands of Colombian families with access to energy sources.

Our progress in energy transition and growth in gas production included the agreement signed by Hocol, an Ecopetrol Group subsidiary, on November 22, 2019 with Chevron Petroleum Company to acquire its stake in the Chuchupa and Ballena fields, located in the Department of La Guajira. This agreement is subject to approval by the Colombian Superintendence of Industry and Commerce, and future developments will be duly reported.

In the international front, we would like to stress the signing of an agreement with Shell Brasil Petróleo Ltda. to acquire a 30% stake in the Gato do Mato, discovery located offshore in the pre-salt Santos Basin.

Moreover, I would also like to highlight the decision of the Council of State which allowed making headway in the Comprehensive Research Pilot Projects, which will provide the country with invaluable information on the feasibility of developing Unconventional Sites in Colombia. During 2020, we will continue to report any progress on this front.

In the midstream segment, the volume transported increased by 4% compared to that of 2018, allowing operational stability and positive financial results, with an EBITDA of ten trillion pesos, which represents a 15% increase compared to previous year results. Furthermore, the new crude transportation tariffs process was completed, providing a moderate income increase for the segment.

During 2019, the pipeline network continued to suffer from incidents attributable to third parties. However, the provisional operations through the Bicentennial pipeline allowed us to reduce these impacts.

With respect to refining, during 2019 we achieved a record high average throughput of 374 thousand barrels per day in the two refineries, which validates good performance despite some unscheduled operational events. The joint gross margin for the downstream segment was $ 10 USD/bbl, mainly affected by the lower product prices and the strengthening of medium and heavy crude, in line with the behavior of the international market.

As part of our efforts to contribute towards preserving the environment, in 2019 we declared our commitment to reduce CO2 (carbon dioxide) emissions by 20% for 2030 and reduce the operation's vulnerability to climate change.

This reduction has been ongoing for several years, and in 2019 we achieved a cumulative reduction of 1.6 million tons of CO2 equivalent from our direct operations through the uninterrupted implementation of energy efficiency projects, the reduction of routine flare stack flaring in Chichimene and the use of renewable energies.

In this latter front, the Company has the goal of incorporating approximately 300 MW of unconventional renewable energy by 2022. In line with this goal, the Castilla Solar Park was inaugurated with 21 MW of installed capacity and the construction of the San Fernando Solar Park with 50 MW capacity is planned for 2020, which will become the largest energy self-generation project developed in the country. This project will prevent the emission of over 410 thousand tons of CO2 into the atmosphere over the next 15 years. The renewable energy goal will allow Ecopetrol to increase its share in these sources from the current 5% to 20% in 2022.

In January 2020 we endorsed the World Bank World-led initiative "Zero Routine Flaring by 2030" as part of our decarbonization plan.

Alternatively, we continue with our commitment to offer the country cleaner fuels. In December, the diesel distributed in Colombia had a weighted average of 10 parts per million of sulphur (ppm) and 110 ppm in gasoline, levels below those required by the current Colombian regulation of 50 ppm in diesel and 300 ppm in gasoline.

Socio-environmental investment totaled COP 245,462 million, evidencing our commitment to the well-being of communities and the environment.

On the governance front, most notable is the completed orderly transition as regards to changes in our Board of Directors, as well as the creation of the Innovation and Technology Committee of the Board, which will promote further progress towards digital transformation, one of the enablers of our strategy.

Having reached in advance the most significant operational and financial milestones outlined in our Business Plan 2019-2021, with a Company successfully operating and financially robust, we are prepared to face new challenges.

The 2022 Plan includes amongst its most significant goals: i) reaching production levels of 780 - 800 mboed; (ii) increase reserves while maintaining the minimum organic replacement rate of 100%, net of price effect; iii) enable an optimal throughput of the integrated refining system at a level between 370 - 420 mbd; iv) increase transported volumes to 1,10 - 1,25 million barrels of oil equivalent per day; (v) invest between USD 13-17 billion, which reflect a level of return on capital above 12% at Plan prices; vi) maintain a strong cash flow position and a gross debt-to-EBITDA ratio of 1.0 - 1.5 times, which safeguards the Company's investment grade; and, vii) consolidate the ESG strategy (Environmental, Social, and Governance). The Plan incorporates continuous portfolio optimization and appraising asset value generation.

We reiterate our commitment to profitably growing our production and reserves through sustainable results, reducing the impact of our operations, encouraging good environmental practices and promoting socio-environmental development in those territories where the Ecopetrol Group is present".

To review the full report please visit the following link:
https://www.ecopetrol.com.co/english/documentos/Reporte%204T19%20%20Ingl%C3%A9s%20VF.pdf

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:

Juan Pablo Crane de Narváez
Head of Capital Markets
Phone: (+571) 234 5190
E-mail: investors@ecopetrol.com.co

Jorge Mauricio Tellez
Media Relations (Colombia)
Phone: (+ 571) 234 4329
E-mail: mauricio.tellez@ecopetrol.com.co

Cision

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SOURCE Ecopetrol S.A.