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Ecopetrol (EC) Earnings Miss Estimates in Q3, Improve Y/Y

Ecopetrol S.A. EC reported third-quarter 2018 earnings of 46 cents per American Depositary Shares or ADS, missing the Zacks Consensus Estimate of 52 cents. The bottom line, however, improved from the year-ago 17 cents.  

Revenues of $6,042 million surpassed the Zacks Consensus Estimate of $5,892 million and rose from the year-earlier $4,530 million.

Increased liquid price realizations and oil equivalent production supported the third-quarter results, partially offset by the surge in operation & projects expenses. Since the release of third-quarter results late last month, the stock has declined almost 12%. 

Segmental Performances

Being an integrated energy firm, Ecopetrol operates in Exploration and Production, Transportation and Logistics and Refining and Petrochemicals segments.

Exploration and Production: From this business, the company generates operating income of 3,729.3 billion of Colombian pesos, considerably higher than 1,290.8 billion of Colombian pesos a year ago. The surge in liquid price realization and higher daily oil equivalent production led to the outperformance.

The company produced 666.5 thousand barrels of oil equivalent per day (mboed), up from 655.6 mboed in the September quarter of 2017. Crude volumes — representing almost 83% of total production — were 551.9 thousand barrels per day (mbd), up from 545.1 mbd in the prior-year quarter.  

Average realized oil and natural gas liquid price was reported at $67.4 per barrel, up from $46.2 in the year-ago quarter.

Transportation and Logistics: The unit contributed operating profit of 1,667.5 billion of Colombian pesos, down from 1,828.2 billion of Colombian pesos in third-quarter 2017. Higher operation and projects expenses hurt the segment, offsetting improved crude and refined product transportation volumes. 

Refining and Petrochemicals: Ecopetrol’s operating income at this segment increased year over year from 204 billion of Colombian pesos to 256 billion of Colombian pesos. The improvement was backed by higher refinery utilization and increased throughput volumes.

Operation & Projects Expenses

The company’s total operation & projects expenses were 1,313.8 billion of Colombian pesos, up from 795.3 billion of Colombian pesos in the September quarter of 2017.

Financial Position

Through third-quarter 2018, the company invested 816 billion of Colombian pesos in property, plant and equipment. For natural and environmental resources, the company’s allotted capital budget was 1,291 billion of Colombian pesos.

As of Sep 30, 2018, Ecopetrol had cash and cash equivalents of 7,120.6 billion of Colombian pesos, while total-debt – shorth-term and long-term loans and borrowings was roughly 39,891 billion of Colombian pesos. The company’s debt-to-capitalization ratio is 45.8%, lower than the industry’s 47.3%.

Ecopetrol S.A. Price, Consensus and EPS Surprise

Ecopetrol S.A. Price, Consensus and EPS Surprise | Ecopetrol S.A. Quote

Zacks Rank & Key Picks

Ecopetrol currently has a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector include Hess Corporation HES, Enterprise Products Partners L.P. EPD and Energen Corporation EGN. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.    

Hess beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 230.5%.

Enterprise Products surpassed the Zacks Consensus Estimate in the prior four quarters, the average positive earnings surprise being 9.3%.

Energen has an average positive earnings surprise of 18.6% for the prior four quarters.

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