Ecopetrol agrees to a temporary 50% reduction in the conversion cost for the purchase and sale of its ADRs

Rhea-AI Summary

Ecopetrol (EC) has announced a temporary agreement with JPMorgan Chase Bank N.A. to reduce the conversion cost for ADR transactions by 50%. This measure will be effective until July 10, 2025, aiming to benefit investors trading Ecopetrol's ADRs in the United States.

As background, Ecopetrol is Colombia's largest company and a major integrated energy player in the Americas, employing over 18,000 people. The company controls more than 60% of Colombia's hydrocarbon production and holds leading positions in petrochemicals and gas distribution. Through its 51.4% stake in ISA, Ecopetrol has expanded into energy transmission and infrastructure operations across Latin America, including Brazil, Chile, Peru, and Bolivia. The company also maintains strategic operations in the US Permian basin and Gulf of Mexico, Brazil, and Mexico.

Positive

• 50% reduction in ADR conversion costs until July 2025, potentially increasing trading accessibility
• Dominant market position with 60%+ of Colombia's hydrocarbon production
• Diversified operations across energy transmission and infrastructure through ISA stake
• Strategic presence in multiple international markets including US, Brazil, and Mexico

Negative

• None.

Insights

Financial Markets Analyst

The temporary 50% reduction in ADR conversion costs is a tactical move to enhance market accessibility and liquidity for Ecopetrol's securities. JPMorgan's agreement to halve conversion fees until July 2025 could stimulate increased trading volume and potentially narrow the price gap between ADRs and ordinary shares.

For retail investors, reduced conversion costs create a more economical entry point to invest in EC's ADRs. The timing aligns with broader market dynamics where emerging market energy companies are seeking to optimize their capital market presence. A simplified explanation: imagine a toll bridge where the operator temporarily cuts the toll by half - more vehicles (in this case, investors) are likely to cross.

The move signals Ecopetrol's commitment to maintaining a competitive position in international markets, particularly important given its extensive operations across the Americas and strategic importance as Colombia's largest energy company. The cost reduction could particularly benefit institutional investors managing large portfolios, as transaction cost savings can be substantial when dealing with significant trading volumes.

Market Structure Specialist

This ADR fee reduction represents a strategic market structure enhancement that could improve the arbitrage efficiency between Ecopetrol's local shares and ADRs. The six-month window provides a clear timeframe for market participants to adjust their trading strategies and potentially increase their market-making activities.

The initiative addresses a key friction point in cross-border trading mechanics. Think of it as reducing the "tax" on currency conversion when traveling abroad - it encourages more frequent exchanges. This could lead to tighter spreads and better price discovery between the Colombian and U.S. markets.

While the impact may seem technical, it's a meaningful development for both institutional investors who engage in arbitrage trading and retail investors seeking cost-effective exposure to Colombian energy markets. The temporary nature of the reduction might create a "use it or lose it" incentive, potentially accelerating trading activity during this period.

BOGOTA, Colombia, Jan. 15, 2025 /PRNewswire/ -- Ecopetrol informs that it reached an agreement with JPMorgan Chase Bank N.A., the depositary bank of its American Depositary Receipts (ADR) program, to reduce 50% of the conversion cost for the purchase and sale of ADRs in the United States. The measure is temporary and is expected to be effective until July 10, 2025.

Ecopetrol trusts that this measure will benefit its investors.

For more information, please go to the following link 

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Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent, with more than 18,000 employees. In Colombia, it is responsible for more than 60% of the hydrocarbon production of most transportation, logistics, and hydrocarbon refining systems, and it holds leading positions in the petrochemicals and gas distribution segments. With the acquisition of 51.4% of ISA's shares, the company participates in energy transmission, the management of real-time systems (XM), and the Barranquilla - Cartagena coastal highway concession. At the international level, Ecopetrol has a stake in strategic basins in the American continent, with Drilling and Exploration operations in the United States (Permian basin and the Gulf of Mexico), Brazil, and Mexico, and, through ISA and its subsidiaries, Ecopetrol holds leading positions in the power transmission business in Brazil, Chile, Peru, and Bolivia, road concessions in Chile, and the telecommunications sector. This press release contains business prospect statements, operating and financial result estimates, and statements related to Ecopetrol's growth prospects. These are all projections and, as such, they are based solely on the expectations of the managers regarding the future of the company and their continued access to capital to finance the company's business plan. The realization of said estimates in the future depends on the behavior of market conditions, regulations, competition, and the performance of the Colombian economy and the industry, among other factors, and are consequently subject to change without prior notice. 

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, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. 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 more information, please contact: 

Head of Corporate Communications
Angela Maria De la Pava Londoño
Email: investors@ecopetrol.com.co

Head of Press 
Juan Pablo Pacavita
Email: juan.pacavita@ecopetrol.com.co

 

View original content:https://www.prnewswire.com/news-releases/ecopetrol-agrees-to-a-temporary-50-reduction-in-the-conversion-cost-for-the-purchase-and-sale-of-its-adrs-302352306.html

SOURCE Ecopetrol S.A.

FAQ

What is the new ADR conversion cost reduction announced by Ecopetrol (EC)?

Ecopetrol announced a 50% reduction in ADR conversion costs for purchases and sales, effective until July 10, 2025, through an agreement with JPMorgan Chase Bank N.A.

How long will Ecopetrol's (EC) reduced ADR conversion costs remain in effect?

The reduced ADR conversion costs will remain in effect temporarily until July 10, 2025.

What percentage of Colombia's hydrocarbon production does Ecopetrol (EC) control?

Ecopetrol controls more than 60% of Colombia's hydrocarbon production.

What is Ecopetrol's (EC) ownership stake in ISA?

Ecopetrol owns a 51.4% stake in ISA, which provides the company with positions in energy transmission and infrastructure operations across Latin America.

In which international markets does Ecopetrol (EC) maintain operations?

Ecopetrol maintains operations in the United States (Permian basin and Gulf of Mexico), Brazil, Mexico, Chile, Peru, and Bolivia.