Investor Presentation ECOPETROL S.A. October 2014

ECOPETROL S.A.
Investor
Presentation
October 2014
Disclaimer
• This document was prepared by Ecopetrol S.A. with the purpose of providing the market and
interested parties certain financial and other information of the Company.
• This document may include strategy discussions and forward-looking statements regarding the
probable development of Ecopetrol’s Business. Said projections and statements include
references to estimates or expectations of the Company regarding its future and operational
results. Potential investors and the market in general should be aware that the information
provided herein does not constitute any guarantee of its performance, risks or uncertainties that
may occur or materialize. Real results may fluctuate and differ from those provided herein due to
several factors outside of the control of the Company. Neither Ecopetrol nor its advisors, officers,
employees, directors or agents, make any representation nor shall assume any responsibility in
the event actual performance of the Company differs from what is provided herein. Moreover,
Ecopetrol, its advisors, officers, employees, directors or agents shall not have any obligation
whatsoever to update, correct, amend or adjust this presentation based on information attained
or events occurred after its disclosure. Additional factors that may affect the future results of
Ecopetrol are set forth in the section entitled “Risk Factors” in the Company’s Report on Form 20F for the year ended December 31, 2013 and in the Company’s other filings with the SEC, which
are available at www.sec.gov.
• This presentation is for discussion purposes only and is incomplete without reference to, and
should be viewed solely in conjunction with, the oral briefing provided by Ecopetrol. Neither this
presentation nor any of its contents may be used for any other purpose without the prior written
consent of Ecopetrol.
2
Agenda
1.
Overview
2.
Upstream
3.
Midstream
4.
Downstream
5.
Financials
3
Overview
Ecopetrol: Key Investment Highlights
1
2
3
Essential Part of
the Colombian
Economy
• Largest company in Colombia, representing 31% of the Market Capitalization of the entire
Colombian stock market (1)
• Essential source of revenue to the Colombian government (dividends, royalties and taxes)
• Oil & Gas sector accounts for over 40% of total exports from Colombia
• One of Latin America’s four largest Oil & Gas companies and one of the six largest publicly
traded companies
Stable and
Favorable
Regulatory
Regime for Oil &
Gas Industry
• Beneficiary of a stable regulatory regime that assures international pricing, as well as a
defined and stable tax and royalty regime
• Colombia’s regulatory regime is one of the most stable and favorable on a global basis, with
more attractive fiscal terms than US GoM, Brazil, Mexico, among other
• 100+ companies operating in Colombia, including global majors, independents and juniors
Integrated
Business with an
Extensive and
Diversified E&P
Portfolio
•
•
•
•
Responsible for 64% of total oil production and 62% of total natural gas production in Colombia
Holds approximately 57% of total Oil & Gas 1P reserves in Colombia
Diversification in production, region, asset ownership structure and sales destination
Vertically integrated: owner of the largest midstream network in the country (79% of total oil
pipeline capacity) and self-sufficient refining capacity
Note: Based on 2013 figures, unless otherwise indicated
(1) As of July 31, 2014
Overview
Upstream
Midstream
Downstream
Financials
5
Ecopetrol: Key Investment Highlights (Cont’d)
4
Positive
Operating Track
Record
5
6
Strong Credit
Profile Backed
by Solid
Financial
Performance
Sound
Corporate
Governance and
Experienced
Management
Team
•
•
•
•
Production increased by 1.8x between 2008 and 2013
1P reserves increased by 1.7x since 2008; reserve replacement ratio above peer average
New reserves mainly corresponding to oil
Recovery factor at 18%, expected to exceed 30% by 2020 through primary, secondary and
tertiary recovery techniques; Original Oil in Place increased by 1.5x since 2007
•
•
•
•
•
Low-cost operator: Higher EBITDA per produced BOE than other majors ($52.1/boe)
EBITDA growth of 1.6x since 2009 (1)
Consolidated Total Debt/EBITDA of 1.0x
Capex Plan to be financed largely through internal cash generation
Commitment to maintain investment grade ratings (currently Baa2/BBB/BBB, with 3 rating
upgrades since 2007)
• High corporate governance standards: 6 independent out of 9 BOD members and history of
respecting independence of corporate decisions
• #1 in the latest National Transparency Index measurement
• Management team successfully increased profitability and market capitalization since IPO in
2007
Note: Based on 2013 figures, unless otherwise indicated
(1) Source: Ecopetrol. Based on COP-denominated figures
Overview
Upstream
Midstream
Downstream
Financials
6
Colombia: Stable, Favorable Regulatory and Fiscal Environment
Favorable Oil & Gas Tax Regime in Global Context
Colombia: Positive Macroeconomic Environment
• High real GDP growth, projected at over 4% for the next few years
and resilient to global setbacks (only one year of negative GDP
growth since 1950)
• Low inflation, in the 3% area over the last years
• Low country risk: EMBI+ index currently at 146 bps(2) (among the
lowest in LatAm), investment grade sovereign credit ratings since
2011 and no default since 1932
• Colombia’s tax and royalty regime is one of the most favorable
on a global basis
• More attractive fiscal terms than in US GoM, Brazil, Peru and
Mexico
Fiscal Terms Index for Oil and Gas Industry – Global Rating (1)
Colombia: Best Ranking in Investor Protection in LatAm
82
Chile
Brazil
Colombia Onshore
6.7
2009
2010
4.2%
4.4%
Brazil Offshore
Russia Onshore
2.3%
7.1
China Offshore
US GOM Shelf
% of GDP
4.0%
3.0%
Germany Onshore
US GoM Deepwater
Foreign Direct Investment in Colombia
US$ bn
Norway Offshore
UK Offshore
13
Peru
6
US
6
Colombia
4
Malaysia
Canada
Hong Kong
Singapore
New
Zealand
4
3
2
1
32
49
Mexico
2013 investor protection ranking by
the World Bank (less=better)
13.4
15.5
16.8
2011
2012
2013
Venezuela Heavy Oil
0
1
2
3
4
5
Source: Ecopetrol , IHS Global Insight, IHS CERA, ANH, World Bank
(1) IHS Composite ranking based on Government take, IRR, Profitability, Revenue Risk and Fiscal Stability
(2) Data as of August 31, 2014
Overview
Upstream
Midstream
Downstream
Financials
7
Colombia´s O&G growth trend
Crude oil production
Exploratory wells drilled
MBOD
No. of wells
531
529
525
588
671
915
785
1,007
944
126
1,008
115
112
99
56
131
75
75
70
Oil and gas equivalent reserves
Foreign Direct Investment in O&G
Millions of barrels
US$ million
% of
total FDI
Overview
Upstream
3,333 3,349
1,995
Downstream
Financials
jun-14
2013
2012
3,080
1,946
jun-14
32%
2013
37%
2012
30%
2011
11%
2010
68%
5,111
2009
70%
2008
70%
2007
68%
2,637
5,471
1,125
2006
70%
Midstream
4,700
32%
2013
67%
30%
2012
66%
32%
30%
2011
67%
68%
30%
3,020
3,587
2010
32%
2008
33%
2007
34%
2006
33%
2,017
2005
2,166
2,276
2,452
2,825
3,239
3,397
2005
Oil
2009
Gas
2011
2010
2009
2008
2007
2006
2005
jun-14
2013
2012
2011
2010
2009
2008
2007
2006
2005
35
33%
48%
32%
36%
32%
40%
8
Source: National Hydrocarbons Agency and Central Bank of Colombia
Integrated Operations With International Presence
Ecopetrol - Subsidiaries & Affiliates
Entities
Upstream
Midstream
Downstream
Source: Company public filings as of December 31, 2013; Ecopetrol
(1) According to SEC methodology, as of December 31, 2013
(2) Net of royalties
(3) Includes minority interests
(4) Pre-Modernization refining capacity (2013)
Overview
Upstream
Midstream
Key Operating Metrics
1H-2014
Direct Market Share in
Colombia
• Exploratory area:
22.5 MM ha
• 1P Reserves: 1.97 bn boe (1)
• RRR: 139% (as of Dec 2013)
• Production: 750 mboed
•
•
•
•
• Crude transported:
930 mbd
• Products transported:
248 mbd
• Capacity in crude pipelines:
79% (3)
• Capacity in product
pipelines: 100%
• Refining capacity:
335 mbod (4)
• Petrochem. prod. capacity:
500K tons/year
• Refining capacity: 100%
• Petrochem: 90%
in polypropylene
Exploration acreage: 37%
Proved reserves: 57% (2)
Crude production: 64%
Gas production: 62%
• Ecopetrol is controlled by the Colombian Government with a 88.5% stake. Remainder is float
that trades in the Colombian Stock Exchange (BVC), NYSE and TSX
Downstream
Financials
9
Leading Company in Colombia and One of the Largest in LatAm
Top 5 Colombian Companies by Revenue
Top 5 Colombian Companies by Investment
2013 US$ bn
37.7
2013 US$ bn
7.6
7.8
7.0
6.9
2.1
6.4
1.5
1.1
1.0
Market Capitalization of Latin American Companies (1)
US$ bn
136.1
Latin America
114.2
98.6
84.8
76.6
Colombia
71.3
59.8
47.8
40.5
34.7
15.2
14.1
13.2
11.6
9.7
Source: Company filings, Bloomberg, Capital IQ
(1) Market Capitalization as of August 31, 2014
Overview
Upstream
Midstream
Downstream
Financials
10
Financial Metrics
Market Capitalization (1)
Revenue Growth
US$ bn
$424
2008 – 2013 CAGR
18.9%
16.9%
$270 $260 $246
$150 $147 $136
6.8%
$100 $91
$90
1.7% 1.1% 1.0% 1.0%
$71
(0.3%) (1.5%)
EBITDA per Produced BOE
ROIC
2013 US$/boe
2013
$55.6 $52.1
$50.6 $47.4
(3.7%)
NM
(2)
18.0%
$43.1 $42.9 $41.5 $41.1
$37.9
15.1% 14.2%
$31.8
$28.2
12.0% 11.1%
10.6%
7.9% 7.8%
6.2% 5.9%
3.6%
Source: Ecopetrol, Capital IQ, and IHS Herold
(1) Market capitalization as of August 31, 2014
(2) Not meaningful given significant divestitures
Overview
Upstream
Midstream
Downstream
Financials
11
2008-2013 Highlights
Upstream
• 1.8x growth in production
• 2.1x growth in revenues
• 1.7x growth in 1P reserves and
average RRR of 167%
• High operational, net income
and EBITDA margins
Financials
• Strong cash flow generation
• 2.3x growth in Market cap
• New model in transportation &
logistics
Midstream
• 58% increase in capacity of oil
and products’ pipelines
• Improvement in HSE standards
Sustainability
• Improved quality of diesel and
gasoline
Downstream
• Member of Dow Jones
Sustainability Index since 2011
• Market diversification
• Refineries’ modernization
(2015 and 2020)
Source: Ecopetrol
Note: Growth metrics based on COP-denominated figures
Overview
Upstream
Midstream
Downstream
Financials
12
2014-2020 Capex Plan Focused on Upstream
Total: $68.5bn
Total: $68.5bn
Other
Downstream
$0.2
$6.5
0%
10%
Midstream
$6.1
9%
$55.7
81%
Upstream
• 81% allocated to Upstream
• 89% in Colombia
Source: Ecopetrol
Upstream
Midstream
$7.5
11%
Debt
$9.6
14%
Cash
Generation
$51.4
75%
Sources
• Conservative assumption of
crude prices
• Diverse sources of funding
(Colombia and International)
Uses
Overview
Equity
Downstream
Financials
13
Upstream
Operational Metrics
Production Growth
Reserve Replacement Ratio (2)
2008 – 2013 CAGR
3-Year Average, % (2011 – 2013)
12.0%
3.5%
151% 143%
137% 130% 129% 128%
120% 115% 112%
103% 100%
0.5% 0.1%
(0.1%) (0.3%) (0.5%) (0.7%)
NM (1)
(3.4%) (3.4%)
Oil as a % of Total 1P Reserves
2013
83%
Average Production Cost (3)
2013 US$/boe
73%
57%
56%
55%
50%
48%
48%
48%
$17.1
$12.6 $12.9 $13.2 $13.2
$11.5 $12.2 $12.4
47%
42%
$7.0
$14.4
$8.2
Source: Ecopetrol, Capital IQ, company filings, and IHS Herold
(1) Not meaningful given significant divestitures
(2) Ecopetrol plus net interests; all figures from IHS Herold except for BP, which is based on company filings
(3) Based on company filings
Overview
Upstream
Midstream
Downstream
Financials
15
Diversified and Growing Resource Base
Original Oil & Gas in Place: Ecopetrol + Partners in Colombia(1)
bn boe
3
+46%
49.1
Produced
15.5
Remaining
oil
33.6
2007
2007-2013 Revisions +
New Fields
9.0
2.6
5.3
1P Reserves
32.2
2013
18%
Heavy Crude Oil
Upstream
Others
• Caño Limon
7%
• R. Hermoso
6%
24%
South • Tibu
7%
• Guando
Total
• Tello
750 mboed
• San Francisco
15%
• La Cira
• Nare
• Casabe
Midstream
60%
11%
Mid Magdalena
38%
Source: Ecopetrol
(1) Gross resources, including royalties
(2) Ecopetrol plus net interests
Overview
Total
7.9 bn
boe
Primary
Recovery
(Infill
drilling:
4.7)
Average 1H14 Production by Region (2)
Catatumbo
44%
29%
Secondary
Recovery
(NonThermal
Recovery:
0.9)
2
Natural Gas
Total
750 mboed
1
Resources
Average 1H14 Production by Product (2)
Medium and Light
Crude Oil
Tertiary
Recovery
(Thermal
Recovery:
2.3)
Downstream
Financials
21%
East
• Rubiales
• Quifa
• Caño Sur
20%
Central
• Castilla
• Chichimene
• Apiay
Northeast
•
•
•
•
Cupiagua
Guajira
Cusiana
Piedemonte
16
Reserve Replacement Ratio
1P Reserves Balance (1) (2)
Reserve Replacement Ratio (2)
mmboe
3-Year Average, % (2011 – 2013)
Gas
Oil
1,857
1,877
1,714
1,538
26%
27%
Peers’ Average: 117%
151%
1,972
143%
137%
128% 129% 130%
27%
28%
112% 115%
100%
27%
120%
103%
1,137
30%
73%
72%
74%
73%
73%
2011
2012
2013
70%
2008
2009
2010
Source: IHS Herold and company filings
(1) SEC standards (net of royalties)
(2) Ecopetrol plus net interests; all figures from IHS Herold except for BP, which is based on company filings
Overview
Upstream
Midstream
Downstream
Financials
17
Increase in Proved Reserves
1P Reserves (1) Balance: 2007 – 2013 (2)
Sources of Addition: 2008 - 2013
mmboe
Extensions
and
discoveries
38%
RRR
(3)
2008 - 2013: 164%
1,972
538
1,210
353
857
2007
1,945
1,183
Production
(4)
Addition
1,434
1,945
mmboe
Gas
Oil
2013
Revisions
48%
Improved
recovery
8%
Acq. /
Divest. 7%
1P Reserves (1) Balance: 2012 – 2013 (2)
Sources of Addition: 2013
mmboe
Extensions
and
discoveries
22%
Acq. /
Divest. 3%
Improved
recovery
8%
RRR (3) : 139%
1,877
506
1,972
340
245
538
1,434
1,370
2012
Production
(4)
Source: Ecopetrol
(1) SEC standards (net of royalties)
(2) Based on year end figures
(3) RRR: Reserve replacement ratio
(4) Production net of royalties (EC + net interests)
Overview
Upstream
Addition
Midstream
Downstream
2013
Financials
Gas
Oil
Revisions
67%
340
mmboe
18
Upstream Strategy
1
Increase
Recovery Factor
1
2
Increase Recovery Factor in existing fields
•
Primary Recovery
•
EOR / IOR (Enhanced Oil Recovery / Improved Oil Recovery)
Exploration
Colombia:
2
Exploration
•
Llanos Orientales
•
Caribbean Offshore
•
Caguan-Putumayo
•
Magdalena Valley and Catatumbo
International:
3
Unconventional
Maintain production increase with
a RRR greater than 100% while
increasing R/P
3
Upstream
Midstream
Brazil
•
U.S. GoM
Unconventional
• Assessment of potential
•
Source: Ecopetrol
Overview
•
Downstream
Joint ventures with strategic partners
Financials
19
Recovery Factor Growth
1
1
Increase
Recovery Factor
2
Exploration
3
Increase Recovery Factor
• Primary Recovery
• EOR / IOR (Enhanced Oil Recovery / Improved Oil Recovery)
Strategy 2014 ‒ 2020
Highlights 2011 ‒ 2014
• Target Recovery Factor: 30-34%
• Original Oil in Place increased 17%
Unconventional
• Increased direct operation to over 50%
(Current: 18%)
• Technological Advances already applied in fields
• Non thermal Recovery: implement pilot programs
(3D, infill drilling, water injections and ASP)
• Implementation of New Technologies for the
and develop projects
development of heavy oil (in situ combustion)
– Water flooding: 25
• CAGR of 12% for production from existing fields
Drilling Campaign in Colombia: 2014-2020 (# of Wells)
Llanos
Drilling
Workover
Catatumbo Mid-Mag
– Chemical injection: 21
– Gas injection: 6
between 2008 and 2013
Basin
• Primary Recovery: drilling more than 3,700 wells
Other
Total
2,199
290
1,775
193
4,459
422
328
255
221
1,226
• Thermal Recovery: implement pilot programs and
develop projects
– Steam: 2
– In Situ Combustion: 2
Source: Ecopetrol Financial & Operational Results 2nd Quarter 2014
Overview
Upstream
Midstream
Downstream
Financials
20
Upstream: Main Projects in Llanos Basin
Castilla
20 drilling rigs by 4Q 2014
Oil handling capacity of 170 mbod by 1Q 2015
and 200 mbod by 4Q 2015
Water handling and disposal of 2,400 mbd by
1Q 2015 and 4,400 mbd by 4Q 2015
•
•
•
Caño Sur East
•
•
Detailed engineering: Progress of 45%
Environmental license expected by 3Q 2014
Chichimene
•
•
•
6 drilling rigs by 3Q 2014 and 8 rigs by 2Q 2015
Oil handling capacity of 80 mbod by 4Q 2014 and
100 mbod by 3Q 2015
Water handling and disposal of 240 mbd by 2Q
2015 and 360 mbd by 3Q 2015
Akacias
•
•
•
Conceptual engineering completed
Basic engineering completed by 4Q 2014
Environmental license expected by 2Q 2015
21
Upstream:
Secondary – Non Thermal Recovery in Producing Fields
Schedule 2013 - 2020
Phase 1: Feasibility
20
12
1
2
9
15
2
3
9
10
2
GAS/WAG
CEOR
WF
9
Non Thermal Projects 2013-2020 (pilots and implementation)
2013 2014 2015 2016 2017 2018
Phase 2: Pilots
13
7
2
5
1
3
9
2
12
3
7
2
GAS/WAG
9
CEOR
Water
CEOR
Gas/WAG
Water
CEOR
Gas/WAG
11
5
3
3
2
0
WF
9
2013 2014 2015 2016 2017 2018
4
10
7
20
1
10
4
2
1
1
6
9
9
Llanos
South
Phase 3: Full Implementation (sanction)
20
Catatumbo
Mid-Magdalena
20
GAS/WAG
CEOR
Water
CEOR
Gas/WAG
7
13
3
Water
CEOR
Gas/WAG
4
1
0
Initial injection expected between 2016 - 2019
WF
2013 2014 2015 2016 2017 2018
CEOR: Chemical enhanced oil recovery; WAG: Water Alternating Gas; WF: Water Flooding
22
Upstream: 2014 Secondary Recovery Pilots
BASIN
MAIN FIELDS
MILESTONES 2014
1Q
Mid
Magdalena
Tisquirama - San Roque (WF)
Galan (WF)
Casabe (CEOR)
Yarigui (CEOR)
South
Santa Clara (WF)
Brisas (WF)
Palo Grande (CEOR)
Tello (WAG)
Llanos
Chichimene (WF)
Castilla (WF)
Apiay (WF)
Suria T2 (WF)
Catatumbo
2Q
3Q
4Q



Sardinata (WF)
Main activities 2014
•
Feasibility Studies: 15
•
Pilots (13): Water flooding, WAG and CEOR
WF = Water flooding, CEOR = Chemical enhanced oil recovery WAG: water alternating gas
23
Upstream:
Chemical Enhanced Oil Recovery and Water Flooding Pilots
San Francisco Field Chemical Enhanced Oil Recovery (CEOR) Pilot
Galan Field Water Flooding (WF) Pilot
24
Upstream: Tertiary - Thermal Recovery in Heavy Oil Fields
Pilots Scheduled in Colombia: 2012 - 2020
2012
2013
2014
2015
2016
Teca-Cocorna
2017
2018
2019
2020
2021
Chichimene
onwards
Quifa
Air
Injection
Quifa
Chichimene
Other fields
Caño Sur
Steam
Injection
Teca-Cocorna
Caño Sur
Castilla
Pilot construction and start up
Full implementation
Rubiales
Pilots 2014
Quifa STAR Pilot:
• Ex-post evaluation
Caño Sur steam injection test:
• Conceptual and basic
engineering to be
completed in 2014
Chichimene Air Injection Pilot
(ECO-GSAI):
• Engineering : 100%
• Procurement: 100%
3D Plot Plan
• Wells: 100%
• Facilities construction: 65%
• Main equipment built and
imported
Tank 10kbls Foundation
Pipe Rack Support
25
Exploration Potential in Colombia and Abroad
2
1
Increase
Recovery Factor
2
Exploration
3
Unconventional
Exploration
Colombia:
• Llanos Orientales
• Caribbean Offshore
• Caguan-Putumayo
• Sustained activity in other basins
Highlights 2011 – 2014
International:
• Brazil
• US GoM
Exploratory wells drilled 2008 – 2014
• Acquisition of new blocks and areas:
• Successful participation rounds
•
Colombia: 5 blocks in round 2014 & 12 blocks in round 2012
•
US GoM: 30 blocks awarded between 2011-2014
•
Brazil: 3 blocks in round 11
Savia
Hocol
ECP America
ECP Peru
ECP Brazil
Ecopetrol S.A.
15
1
1
• New areas of high potential in Colombia:
13
Caguan – Putumayo
• 98 A3 wells drilled (2011-2014) and 38 successful
2008
39
7
28
19
2
1
16
2009
9
7
2
2
3
1
2
21
13
2010
23
2
22
1
8
7
14
2
2
3
3
3
7
2011
2012
12
2013
9
1H2014
• Commercialities of Caño Sur and Akacias (4Q 2013)
Source: Ecopetrol
Overview
Upstream
Midstream
Downstream
Financials
26
Unconventional Hydrocarbon Strategy in Colombia
3
1
Increase
Recovery Factor
2
Exploration
3
Unconventional
• Assessment of potential
• Joint ventures with strategic partners with ample shale expertise
Highlights 2011 ‒ 2014
• ANH approval of environmental regulation
Unconventional
Sep 2014
• Drilled 4 stratigraphic wells in Mid
Magdalena and 1 well in Catatumbo
• New areas for exploration in Colombia:
Catatumbo
Mid Magdalena
Cordillera, Mid Magdalena and Catatumbo
Strategy 2014 – 2020
Cordillera
• Finish Evaluation
• Implement Projects
• Ensure required operations
EIA and ARI estimate 15.5 tcf of shale gas and
6.8 bn barrels of tight oil resources in Colombia
Source: Ecopetrol, U.S. Energy Information Administration (EIA) and Advanced Resources International Inc. (ARI)
Overview
Upstream
Midstream
Downstream
Financials
27
Midstream
Midstream Overview
Cenit Overview
Highlights 2011 – 2014
• Cenit: Ecopetrol´s subsidiary specialized in Midstream
and Logistics
• 100% owned by Ecopetrol
• Incorporated in Jul-12, Cenit started operations in Apr-13
• Total crude oil transportation capacity of 1,285 mbd (1)
• Network length of 6,746 km (2)
• Guarantees Ecopetrol the required capacity for
hydrocarbon transportation
• Access to all oil and gas companies, based on clear and
transparent rules
• Self-capacity to fund future projects
• Jul 2013-Jun 2014 EBITDA of US$1.4 bn (Consolidated)(3)
• Transported volumes increased by ~14%
• Diversified network of crude and product pipelines
throughout Colombia
• Expansions in pipeline, storage and port capacity
enabling transport of increasing production, especially of
heavy crudes coming from Llanos basin
• Partnerships with other O&G companies and carriers to
develop new pipelines
Transported Volumes
mbd
1,178
1,036
248
265
(100% Owned
by Ecopetrol)
930
771
ODC
ODL
OBC
OCENSA
73.0%
65.0%
55.9%
72.6%
Refined & Oil
Pipeline Assets
2010
Products
Oil
1H2014
Operator: Ecopetrol
Source: Ecopetrol
(1) Proportional at Cenit’s stake in each pipeline
(2) Crude oil and multi-purpose pipelines
(3) Converted into USD from COP$2,723 bn at FX rate of COP/USD 1,934.29 (jul 2013 – jun 2014)
Overview
Upstream
Midstream
Downstream
Financials
29
Downstream
Refining Modernization to Improve Profitability
Ecopetrol holds 100% of the refining capacity in Colombia,
which makes it a self-sufficient vertically integrated company
(1)
Reficar (Cartagena)
Future
Pre-Modernization
• Capacity
80 mbd
165 mbd
• Nelson Index
5.4
10.4
• Feed of Heavy Crudes
0%
61%
• Conversion Factor
76%
>97%
• Project Completion (2)
92.3%
• COD
2015
Barrancabermeja
• Capacity
250 mbd
250 mbd
• Nelson Index
6.9
10.3
• Feed of Heavy Crudes
38%
70%
• Conversion Factor
75%
>95%
• Project Completion (2)
18.4%
• COD
2020
•
Increase load
capacity of heavy
crudes
•
Going from mid to
deep conversion
•
Improve quality of
products to access
new markets with
higher standards
•
Expected
improvement of
profitability
Source: Ecopetrol
(1) Reficar went through a scheduled shutdown in March 2014 as part of the transition process for the beginning of operations of new refinery in 2015
(2) As of June 30, 2014
Overview
Upstream
Midstream
Downstream
Financials
31
Refining Modernization to Improve Profitability (Cont’d)
Output : Maximize Gasoline and Mid Dists.
production to increase revenues
Feedstock: Increase processing of heavy
crudes reduces the cost
Reficar
(Cartagena)
(2)
92% progress
(1)
80 mbd
165 mbd
165 mbd
7%
20%
19%
36%
29%
28%
61%
Pre-Modernization (2013)
Modernized (2015)
250 mbd*
250 mbd
15%
10%
Gasoline
2%
250 mbd*
3%
Modernized (2015)
2% 250 mbd
5%
4%
44%
LPG
Mid-Distillates
37%
36%
Pre-Modernization (2013)
Gasoline
44%
24%
Modernized (2020)
Petrochems
Propylene
32%
70%
Medium
Fuel & Coke
37%
49%
Heavy & Sour
Mid-Distillates
7%
Pre-Modernization (2013)
1%
3%
20%
Pre-Modernization (2013)
LPG
54%
7%
93%
B/meja
18% progress (2)
80 mbd
1%
Fuel & Coke
Modernized (2020)
Light
* Nominal capacity is 250 mbd. Current throughput is approx. 225 mbd given the quality of crude oil available. Without the modernization
project the throughput would be reduced to approx. 190 mbd
Source: Ecopetrol
(1) Reficar went through a scheduled shutdown in March 2014 as part of the transition process for the beginning of operations of new refinery in 2015
(2) As of June 30, 2014
Overview
Upstream
Midstream
Downstream
Financials
32
Financials
Sales Growth Driven by Exports
Total Sales (1)
Destination of Crude Oil Exports
mboed
US$ / barrel
Sales Growth: 1.9x
$99.1
$99.7
$61.8
$63.0
547
$102.6
$72.0
733
650
857
$98.5
$96.7
881
923
908
522
494
148
370
521
216
302
540
327
331
348
363
363
359
384
386
2007
2008
2009
2010
2011
2012
2013
1H2014
475
Local sales (2)
(3)
Other
448
U.S.
Asia
103 (23%)
312
57 (17%)
Price of Crude Export Basket
Exports
mboed (% of total)
150 (34%)
Exports (1)
mboed
Exports Growth: 3.5x
371
148
216
16
51
53
95
149
2007
2008
Crude oil
302
20
7
52
49
233
2009
312
2010
Products
Upstream
522
22
24
13
54
59
55
61
414
445
456
448
201 (65%)
195 (44%)
53 (17%)
2010
2011
2012
2013
1H2014
Natural gas
Source: Ecopetrol; Company Filings
(1) Figures for Ecopetrol S.A.
(2) Local sales include sales to free trade zones
Overview
540
521
494
25
1H2014
Non-US exports are becoming increasingly
important to Ecopetrol
(3) Includes prices of local sales
and sales to free trade zones
Midstream
Downstream
Financials
34
Income Statement: Ecopetrol Consolidated (1)
US$ bn (2)
Source: Ecopetrol
(1) Starting the second quarter of 2013 Ecopetrol adjusted the EBITDA calculation in order to comply with guidelines in SEC Regulation G. Calculation is as follows:
EBITDA = Net Income + Net Interest+ Taxes + Depreciation + Amortization +/- Extraordinary Items
Figures from previous years have been re-estimated according to this new formula
(2) Average 12-month FX Rates : COP/USD 1967.11 (2008), 2153.30 (2009), 1898.68 (2010), 1846.97 (2011), 1797.79 (2012), 1869.10 (2013), 1913.61 (2Q 2014)
Overview
Upstream
Midstream
Downstream
Financials
35
Cash Flow: Ecopetrol Consolidated
US$ bn (1)
2008
2009
2010
2011
2012
2013
LTM2Q14
Initial Cash Balance
1.9
0.9
1.7
1.9
3.5
4.5
3.5
(+/-) Net cash from operations
5.3
4.3
7.6
12.5
11.8
9.4
9.0
(-) Capex
(3.4)
(6.0)
(5.4)
(7.9)
(8.6)
(7.6)
(7.3)
(-) Acquisitions
(0.6)
(0.5)
(0.6)
(0.5)
-
-
-
(-) Other cash from investing
(0.4)
3.7
(0.6)
(1.0)
(0.6)
2.4
(1.3)
(-) Dividend payments
(2.4)
(4.1)
(2.0)
(3.2)
(4.7)
(7.8)
(5.3)
(+) Equity offering
0.4
0.0
0.0
1.2
0.0
0.0
0.0
(+) New debt
0.1
2.9
1.5
(0.1)
2.8
4.0
6.0
(+/-) Other inflows / outflows
0.1
0.3
(0.2)
0.6
(0.0)
-
0.0
-
-
-
-
(0.1)
0.1
(0.0)
0.9
1.7
1.9
3.5
4.5
4.6
4.7
(+/-) FX differences
Ending Cash Balance
Source: Ecopetrol
(1) US$ cash flows are converted using average exchange rates. Initial cash balance for each period is calculated using the end of period FX rate at the end of the previous year. Ending cash balance
is calculated using the end of period FX rate at the end of the year
Overview
Upstream
Midstream
Downstream
Financials
36
Balance Sheet: Ecopetrol Consolidated
US$ bn (1)
Source: Ecopetrol
(1) End of Year FX Rate: COP/USD 2248.60 (2008), 2043.80 (2009), 1913.98 (2010), 1942.70 (2011), 1768.23 (2012), 1929.50 (2013), 1881.19 (Jun 2014)
(2) Total capitalization: total debt + shareholders’ equity + minority interests
(3) Considers Ecopetrol’s and its subsidiaries’ production
(4) Includes reserves of the Corporate group. Ecopetrol accounts for 95% of the proven reserves of the group
Overview
Upstream
Midstream
Downstream
Financials
37
Credit Profile
Ecopetrol is currently rated Baa2 (Moody´s)/BBB (S&P) /BBB (Fitch) and has received 3 upgrades since 2007
Total Debt / EBITDA
Total Debt / Total Capitalization
Sources of Funding (1)
1.0x
0.8x
0.6x
0.6x
16.9%
16.4% 15.5% 17.6%
13.4%
0.5x
22.7%
27.4%
Local
Syndicated
Loan
Local
Bonds
0.3x
Other
11%
11%
3%
Total
US$9.6 bn
75%
2008 2009 2010 2011 2012 2013 LTM
2Q14
2008 2009 2010 2011 2012 2013 LTM
2Q14
Consolidated Debt Amortization Schedule
US$ mm
2,250
Ecopetrol S.A.
International
Bonds
Subsidiaries
1,500
750
2045
2044
2043
2042
2041
2040
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
0
Source: Ecopetrol
Note: Ecopetrol on a consolidated basis, unless otherwise indicated and does not include its subsidiary OCENSA’s $500mm international bond issued on April 30, 2014
(1) Figures for Ecopetrol S.A. FX rate: COP/USD 1911 (as of June 30, 2014)
Overview
Upstream
Midstream
Downstream
Financials
38
Primary equity offerings and shareholders
Primary Equity Offerings of Ecopetrol
Ecopetrol´s market float (BVC, NYSE and TSX)
(June 30/2014)
US$
2.8 bn
20.0%
Foreign inv.
and ADRs
10.1%
Retail inv.
1.6%
1.4%
Other
3.6%
US$
1.3 bn
8.5%
11.5% of the
ownership
2.0%
4.3%
Total Authorized
Law 1118
Round 1 (2007)
Round 2 (2011)
Proceeds (US$ bn)
Future rounds
Main instit.
Inv.
Colombia
Colombian government: 88.5%
Source: Ecopetrol
39
Dividends
Dividends per share (COP$) and payout ratio
Extraordinary Dividend
Ordinary Dividend
Payout Ratio
300
291
37
36
225
115
115
115
91
2008
2009
2010
Source: Ecopetrol
76.5%
33
145
105
263
255
2011
2012
2013
2014
70.3%
79.9%
79.9%
80.1%
91
89.9%
260
70.1%
227
145
40
2014 Capex
Capex (US$mn)
Breakdown of Capex
3%
EC's projects
13%
20%
6,463
Production
US$10.6
billion
Exploration
48%
1,908
Total Capex EC
8,371
Refining
Transport
17%
EC's inv. in subsidiaries
Other
Capex allocation:
Subsidiaries*
2,224
• 61% to Ecopetrol S.A. / 39% to Subsidiares
• 95% in Colombia
• 65% to E&P
Total Capex Corporate
Group
* Prorated according to Ecopetrol’s stake
Source Ecopetrol
10,595
41
Investor Relations
• Phone
+ 571 234 5190
• Email
[email protected]
• Website
www.ecopetrol.com.co
42
Appendix
Financial Obligations: Ecopetrol S.A. (1)
1
Loans
(USD & COP)
2
2013 Local
Syndicated Loan
2013 US Ex-Im Bank
Guaranteed Loan
• Outstanding: US$318 mm
• Maturity: 7 and 10 years
• Interest rate: Libor + 0.65% and Libor + 0.9%
• Amortization: semiannual
Dec 2010
• Issued / Outstanding: COP$1.0 tn (Dec 2010) / COP$1.0 tn
• Amortization: Bullet
• Ratings: Fitch AAA (local rating)
• Term:
5 years
7 years
Coupon (inflation indexed)
IPC + 2.80%
IPC + 3.30%
Outstanding (COL $mm)
$97,100
$138,700
10 years
IPC + 3.94%
$479,900
30 years
IPC + 4.90%
$284,300
Aug 2013
• Issued / Outstanding: COP$900 bn (Aug 2013) / COP$900 bn
• Amortization: Bullet
• Ratings: Fitch AAA (local rating)
• Term:
5 years
10 years
Coupon (inflation indexed)
IPC + 3.79%
IPC + 4.60%
Outstanding (COL $mm)
$121,000
$169,000
15 years
IPC + 4.90%
$348,000
30 years
IPC + 5.15%
$263,000
• Issued / Outstanding: US$1.5 bn (Jul 2009) / US$1.5 bn
• Coupon: 7.625% (semiannual)
• Maturity: 10 years (Jul 23, 2019)
• Amortization: bullet
• Issued / Outstanding: US$2.5 bn (Sep 2013) / US$2.5 bn
• Amortization: Bullet
• Term:
5 years
10 years
Coupon (semiannual)
4.25%
5.875%
Outstanding (US$mm)
$350
$1,300
30 years
7.375%
$850
Local Bonds
(COP)
3
• Issued / Outstanding: COP$1.84 tn (May 2013) / COP$1.84 tn
•Maturity: 12 years (including 3-year grace period)
• Interest rate: DTF + 2.5% anticipated quarterly rate
• Amortization: semiannual
Jul 2009
Sep 2013
International
Bonds (USD)
May 2014
Sep 2014
• Issued / Outstanding: US$2 bn (May 2014) / US$2 bn
• Coupon: 5.875% (semiannual)
• Maturity: 31 years (May 28, 2045)
• Amortization: bullet
• Issued / Outstanding: US$1.2 bn (September 2014) / US$1.2 bn
• Coupon: 4.125% (semiannual)
• Maturity: 10 years and 4 months (January 16, 2025)
• Amortization: bullet
Source: Ecopetrol
(1) Does not include subsidiaries
44
Financial Obligations: Subsidiaries
• Issued: COP$800 bn (May 2010)
• Outstanding: COP$640 bn
• Maturity: 7 years (including 2-year grace period)
• Interest rate: DTF + 4% anticipated quarterly rate
• Amortization: Quarterly
EC´s Share
65.00%
Local
Commercial
Loan
EC´s Share
55.97%
Local
Syndicated Loan
EC´s Share
72.65%
International
Bond
EC´s Share
91.43%
Local
Commercial
Loans
EC´s Share
100%
Securitization
• Issued: COP$500 bn (Oct 2009)
• Outstanding: COP$300 bn
• Maturity: 7 years
• Interest rate: IPC + 4.88%
• Amortization: Bullet
• Issued / Outstanding : COP$2.1 tn (May 2010 ) / COP$2.0 tn
• Maturity: 12 years (including 1-year grace period)
• Interest rate:DTF+4.54% anticipated quarterly rate
• Amortization: Quarterly
• Issued / Outstanding: US$500 mm (Apr 2014) / US$500 mm
• Maturity: 7 years
• Interest rate: 4.0%
• Amortization: Bullet
• Outstanding: COP$382,547bn
• Outstanding: COP$164,852 bn
• Maturity: 7-15 years (including 3-year grace period)
• Interest rate: DTF + Spread (3% - 4%)
• Anticipated quarterly rate
Project Finance
Leasing
• Maturity: 17 years (including 4-year grace
period)
• Interest rate: DTF + Spread (3,25% )
• Anticipated quarterly rate
• Approved Facilities: US$3,497 million in five different tranches (US Exim Bank Direct, US Exim Guaranteed,
SACE, EKN and a facility with the Commercial Banks). As of May 2014th , 100% disbursed
• Outstanding: US$3,450 million
• Maturity: 14 - 16 years
• Interest rate: Libor + Spread (0.6% - 3.0%), banks commercial interest
• Amortization: Semiannual beginning Jun 2014
Total Subsidiaries’ Financial Obligations (1):
• Gross: US$ 5.8 bn
• Ecopetrol’s stake: US$ 5.0 bn
Source: Ecopetrol
(1) FX rate: COP/USD 1881.19 (as of June 30, 2014)
45
Income Statement: Ecopetrol S.A. (1)
US$ bn (2)
2008
2009
2010
2011
2012
2013
2Q14 LTM
Total Revenues
16.6
12.9
19.3
30.6
33.1
33.4
32.7
Gross Income
7.5
4.8
8.1
14.5
14.3
12.9
11.9
Operating Income
6.5
3.8
7.0
13.2
12.7
10.5
9.5
Operating Margin
39%
29%
36%
43%
38%
31%
29%
Income before Taxes
8.1
3.3
6.0
12.4
12.0
10.9
9.9
Net Income
5.9
2.4
4.4
8.4
8.3
7.1
6.6
Net Margin
36%
19%
23%
27%
25%
21%
20%
EBITDA
9.1
5.1
8.7
16.3
15.9
15.2
14.4
EBITDA Margin
55%
40%
45%
53%
48%
46%
44%
Total Debt / EBITDA
0.3x
0.5x
0.4x
0.2x
0.2x
0.4x
0.6x
Source: Ecopetrol
(1) Starting the second quarter of 2013 Ecopetrol adjusted the EBITDA calculation in order to comply with guidelines in SEC Regulation G. Calculation is as follows:
EBITDA = Net Income + Net Interest+ Taxes + Depreciation + Amortization +/- Extraordinary Items
Figures from previous years have been re-estimated according to this new formula
(2) Average 12-month FX Rates : COP/USD 1967.11 (2008), 2153.30 (2009), 1898.68 (2010), 1846.97 (2011), 1797.79 (2012), 1869.30 (2013), 1913.61 (2Q 2014)
46
Balance Sheet: Ecopetrol S.A.
US$ bn (1)
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
Jun 14
Total Assets
23.0
26.0
34.0
43.9
56.9
59.1
62.5
Total Debt (2)
2.3
2.7
3.5
3.2
3.1
6.4
8.5
Net Debt
(0.2)
1.5
2.6
0.9
0.1
4.4
6.4
Total Liabilities
9.9
10.0
12.3
15.6
20.0
21.9
26.7
Shareholders’ Equity
13.1
16.0
21.7
28.3
36.9
37.2
35.8
15.0%
14.2%
13.7%
10.1%
7.7%
14.6%
19.3%
Total Debt / boe Production (4)
n.a.
14.6
16.3
13.0
12.1
23.6
32.4
Total Debt / Proved Reserves (5)
2.0
1.7
2.0
1.7
1.6
3.2
4.3
Total Debt / Total Cap (3)
Source: Ecopetrol
(1) End of Year FX Rate: COP/USD 2248.60 (2008), 2043.80 (2009), 1913.98 (2010), 1942.70 (2011), 1768.23 (2012), 1929.50 (2013), 1881.19 (Jun 2014)
(2) Includes only Ecopetrol S.A. debt
(3) Total capitalization: total debt + shareholders’ equity
(4) Includes only Ecopetrol S.A. gross production (Ecopetrol production + royalties). Does not include affiliates production
(5) Includes reserves of the Corporate group. Ecopetrol accounts for 95% of the proved reserves of the group
47
Income Statement: Ecopetrol S.A.(1)
COP bn
2008
2009
2010
Total Revenues
32,749.3
27,674.0
36,661.2
Gross Income
14,694.6
10,243.4
Operating Income
12,883.3
Operating Margin
2013
2Q14 LTM
56,492.3 59,524.6
62,514.3
63,138.1
15,422.6
26,704.6 25,706.8
24,078.8
22,991.3
8,083.5
13,208.7
24,351.8 22,856.4
19,627.4
18,288.6
39%
29%
36%
31%
29%
Income before Taxes
16,004.9
7,202.4
11,426.0
22,814.9 21,525.6
20,376.5
19,218.6
Net Income
11,630.7
5,256.2
8,346.1
15,448.3 14,973.0
13,353.0
12,677.2
Net Margin
36%
19%
23%
21%
20%
17,958.0
10,957.0
16,513.0
28,497.5
27,924.6
EBITDA Margin
55%
40%
45%
53%
48%
46%
44%
Total Debt / EBITDA
0.0x
0.4x
0.4x
0.2x
0.2x
0.4x
0.6x
EBITDA
2011
43%
27%
2012
38%
25%
30,024.0 28,555.0
Source: Ecopetrol
(1) Starting the second quarter of 2013 Ecopetrol adjusted the EBITDA calculation in order to comply with guidelines in SEC Regulation G. Calculation is as follows:
EBITDA = Net Income + Net Interest+ Taxes + Depreciation + Amortization +/- Extraordinary Items
Figures from previous years have been re-estimated according to this new formula
48
Balance Sheet: Ecopetrol S.A.
COP bn
Dec 08
Dec 09
Dec 10
Total Assets
51,626.2
53,092.4
65,126.0
85,251.2 100,648.0 114,041.2 117,543.9
Total Debt (1)
5,215.8
5,421.5
6,614.2
6,171.6
5,475.6
12,320.3
16,078.5
Net Debt
(383.3)
3,134.5
5,022.1
1,674.2
215.5
8,419.0
12,126.1
Total Liabilities
22,181.2
20,389.2
23,598.1
30,240.1 35,389.5
42,246.7
50,163.4
Shareholders’ Equity
29,445.0
32,703.2
41,527.9
55,011.0 65,258.5
71,794.5
67,380.5
15.0%
14.2%
13.7%
14.6%
19.3%
Total Debt / boe Production (3)
n.a.
29,784.0
31,270.3
25,232.6 21,311.6
45,521.6
61,014.0
Total Debt / Proved Reserves (4)
4,587.4
3,525.0
3,858.9
3,323.4
6,247.6
8,153.7
Total Debt / Total Cap (2)
Dec 11
10.1%
Dec 12
7.7%
2,917.2
Dec 13
Jun 14
Source: Ecopetrol
(1) Includes only Ecopetrol S.A. debt
(2) Total capitalization: total debt + shareholders’ equity
(3) Includes only Ecopetrol S.A. gross production (Ecopetrol production + royalties). Does not include affiliates production
(4) Includes reserves of the Corporate group. Ecopetrol accounts for 95% of the proved reserves of the group
49
Income Statement: Ecopetrol Consolidated
COP bn
2008
2009
2010
Total Revenues
33,896.7
30,404.4
41,968.3
Gross Income
14,812.2
10,498.3
Operating Income
12,657.4
Operating Margin
2011
2013
2Q14 LTM
65,967.5 68,852.0
70,428.7
72,098.6
16,009.3
29,262.9 28,316.5
27,874.4
27,722.2
7,873.3
12,878.8
25,872.9 24,206.3
21,834.7
21,157.6
37%
26%
31%
31%
29%
Income before Taxes
16,011.2
7,250.8
11,492.6
23,641.4 22,331.7
21,882.2
21,080.2
Net Income
11,629.7
5,132.1
8,146.5
15,452.3 14,778.9
13,106.5
12,362.2
Net Margin
34%
17%
19%
19%
17%
EBITDA
n.a.
10,609.9
15,930.2
28,013.7
27,375.8
EBITDA Margin
n.a.
35%
38%
45%
41%
40%
38%
Total Debt / EBITDA
n.a.
0.6x
0.6x
0.3x
0.5x
0.8x
1.0x
39%
23%
2012
35%
21%
29,625.6 28,506.9
Source: Ecopetrol
50
Balance Sheet: Ecopetrol Consolidated
COP bn
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Total Assets
53,702.5
55,559.5
68,769.4
92,277.4 113,879.6 132,428.0 137,130.8
Total Debt
5,916.7
6,151.4
8,912.9
8,801.5
13,705.9
22,198.6
27,047.1
Net Debt
(469.5)
2,589.3
5,186.1
2,021.6
5,765.1
13,357.1
18,296.4
Total Liabilities
23,514.5
22,048.2
26,955.2
35,335.9 46,536.5
56,735.0
65,610.2
Shareholders’ Equity
29,300.3
32,570.0
41,328.2
54,688.9 64,740.9
71,119.2
66,504.4
Minority Interests
887.7
941.3
486.0
2252.6
2602.2
4,573.7
5,016.2
Total Debt / Total Cap (1)
16.4%
15.5%
17.6%
13.4%
16.9%
22.7%
27.4%
Total Debt / boe Production (2)
36,264.6
32,347.9
39,576.8
33,306.2 49,801.6
77,180.1
96,233.4
Total Debt / Proved Reserves (3)
5,203.8
3,999.6
5,200.1
4,739.6
11,256.9
13,716.1
7,302.0
Dec 13
Jun 14
Source: Ecopetrol
(1) Total capitalization: total debt + shareholders equity + minority interests
(2) Considers Ecopetrol’s and its subsidiaries’ production
(3) Includes reserves of the Corporate group. Ecopetrol accounts for 95% of the proved reserves of the group
51
Sep
ENERGY FOR THE FUTURE
Ecopetrol S.A. All rights reserved. The re production of this presentation is forbidden without the written authorization of Ecopetrol S.A.