Colombia’s Ecopetrol anticipates production rise in 2023 as profits dive

The logo of Colombia's energy giant Ecopetrol S.A.

Colombia’s state-owned energy giant, Ecopetrol S.A., is gearing up for a substantial surge in production, forecasting a robust output of up to 741,000 barrels of oil equivalent per day (boed) by the end of 2023. While the company is revving up its production engine, financial reports indicate a 46.5% decline in third-quarter net profit compared to the previous year, primarily attributed to a downturn in oil prices globally and the impact of President Petro’s tex reform.

The company posted a third-quarter net profit of COP$5.1 trillion pesos (US$1,27 billion) compared to COP$9.5 trillion in 2022.

The company’s 15th-anniversary celebration on the New York Stock Exchange (NYSE) highlighted a strategic shift towards diversification in the country’s energy sector. With the Colombian government owning slightly over 88% of the company, an extraordinary general meeting is being convened to explore the possibility of transforming Ecopetrol into a broader energy entity.

Colombian Finance Minister Ricardo Bonilla stated that this transformation is aimed at preserving the value of the company’s hydrocarbon business, while accelerating the growth of new low-emission solutions. Ecopetrol appears committed to pursuing an equitable energy transition and diversifying its presence in the electric energy sector.

Ecopetrol’s third-quarter 2023 operational and financial results underscore the company’s commitment to portfolio diversification while safeguarding the integrity and value of its traditional business lines. Ecopetrol’s President, Ricardo Roa, emphasized the importance of maintaining “strict capital discipline” to ensure profitability and “sustainable growth across business lines,” all while advancing toward energy transition.

The company’s average production for the year through September 30 increased by 3.3%, reaching 729,500 boed. This modest increase in 2023 is attributed to Ecopetrol drilling 15 exploratory wells, surpassing its annual target by 60%. Furthermore, in the third quarter of 2023, the company announced five onshore discoveries in addition to the gas discovery in the Glaucus-1 well. These six discoveries, along with the recent Magnus-1 discovery in October, collectively represent a total of 10 exploratory successes for the year in progress.

The government of leftist President Gustavo Petro, however, has sent shock waves through the energy industry, with repeated announcements that the country will not sign new oil and gas exploration contacts, and pursuing a policy to reduce the country’s dependence on fossil fuels.

Despite turbulence in the exploration sector, in September, Moody’s Investors Service reaffirmed Ecopetrol S.A.’s investment-grade rating, highlighting the company’s commitment to adapt to green energy solutions. As Ecopetrol diversifies its portfolio, and aims to strike a balance between traditional energy resources and low-emission innovations, the slump in foreign revenue income presents a serious challenge for the national government to bankroll a contentious health reform that is dependent to a large degree on the energy giant’s financial resolve.