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Ecopetrol's (EC) Q4 Earnings Fall Y/Y, Revenues Increase

Zacks Equity Research
After stumbling into the bear market territory in the second half of last year, the U.S. biotechnology sector recovered in the first six months of this year.

Ecopetrol S.A. EC reported fourth-quarter 2018 net income of 2,647 billion of Colombian pesos, lower than 3,427 billion of Colombian pesos in the December quarter of 2017. This was due to lower margin from Barrancabermeja refinery.

However, revenues of 18,314 billion of Colombian pesos came in higher than 15,363 billion of Colombian pesos in the December quarter of 2017, courtesy of increased crude price realization and solid daily oil equivalent production.  

Segmental Performances

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

Exploration and Production:The company generates operating income of 3,970 billion of Colombian pesos from this business, which is considerably above 2,805 billion of Colombian pesos a year ago. The surge in oil price realization and greater daily oil equivalent production led to this outperformance.

The company produced 671.9 thousand barrels of oil equivalent per day (mboed), up from 657.3 mboed in the December quarter of 2017. Crude volumes — representing almost 83% of total production — were 557.9 thousand barrels per day (mbd), up from 544.5 mbd in the prior-year quarter.     

Average realized Brent oil price was reported at $68.6 per barrel, up from $61.5 in the year-ago period.

Transportation and Logistics:The unit contributed operating profit of 1,818 billion of Colombian pesos, up from 1,675 billion of Colombian pesos in fourth-quarter 2017. This was owing to expansion in transported volumes of crude oil and refined products.

Refining and Petrochemicals:Ecopetrol incurred an operating loss of 1,294 billion of Colombian pesos in this segment against a profit of 1,135 billion of Colombian pesos in the comparable quarter last year. Lower margin from Barrancabermeja refinery hurt the segment’s performance.

Financial Position

Through fourth-quarter 2018, the company invested $1,118.3 million of capital. Of the total capital budget, production accounted for almost 67%. 

As of Dec 31, 2018, Ecopetrol had cash and cash equivalents of 6,312 billion of Colombian pesos while total debt including short-term and long-term loans plus borrowings was roughly 38,063 billion of Colombian pesos. The company’s debt-to-capitalization ratio is 39.1%.

Robust Reserves

As of Dec 31, 2018, the net proven reserves of Ecopetrol Group were 1,727 million barrels of oil equivalent (MMBoE), up from 1,659 MMBoE in the prior year.

Zacks Rank and Key Picks

Currently, Ecopetrol carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Antero Resources Corporation AR, Jones Energy Inc. JONE and Golar LNG Partners LP GMLP. Antero Resources sports a Zacks Rank #1 (Strong Buy) while Jones Energy and Golar LNG carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.    

Antero Resources’ earnings beat the Zacks Consensus Estimate in the two straight quarters.

Jones Energy expects 2019 earnings growth of 19% year over year.

Golar LNG delivered average positive surprise of 92.8% in the preceding four quarters.

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