Ecopetrol Group Announces Fourth Quarter 2020 and full-year Results as well as an update of its Business Plan 2021-2023
Ecopetrol S.A. reported its financial results for Q4 and the full year 2020, revealing a significant decline in performance compared to 2019. Total sales dropped by 23.6% in Q4 and 29.4% for the year, totaling COP 50,027 billion. Net income attributable to owners fell by 83.2% in Q4 and by 87.3% annually, reaching COP 1,688 billion. Operating income decreased by 74.3% in Q4 and 65.6% year-over-year. The EBITDA margin declined to 30.5% from 38.6%. The results reflect substantial challenges faced during the year, particularly due to various impacts from the global oil market and operational costs.
- Reduction in variable costs by 26.6% in Q4 and 27.0% for 2020.
- Decrease in fixed costs, down 5.8% in Q4 and 8.0% for the year.
- Recovery of impairment of long-term assets showing a positive result of COP 605 billion in Q4.
- Net income attributable to owners dropped by 83.2% in Q4 and 87.3% annually.
- Operating income down 74.3% in Q4 and 65.6% for the full year.
- Total sales fell by 23.6% in Q4, totaling COP 14,190 billion, and by 29.4% for the year.
- EBITDA decreased by 39.6% in Q4 and 45.9% for the full year.
BOGOTÁ, Feb. 23, 2021 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) reported today the financial results of the Ecopetrol Group for the fourth quarter and the cumulative results for 2020, prepared in accordance with the International Financial Reporting Standards applicable to Colombia.
Table 1: Financial Summary Income Statement - Ecopetrol Group |
Billion (COP) | 4Q 2020 | 4Q 2019 | ∆ ($) | ∆ (%) | 12M 2020 | 12M 2019 | ∆ ($) | ∆ (%) | ||
Total sales | 14,190 | 18,581 | (4,391) | ( | 50,027 | 70,847 | (20,820) | ( | ||
Depreciation and amortization | 2,300 | 2,101 | 199 | 8,985 | 8,290 | 695 | ||||
Variable cost | 5,536 | 7,547 | (2,011) | ( | 19,840 | 27,176 | (7,336) | ( | ||
Fixed cost | 2,471 | 2,622 | (151) | ( | 8,728 | 9,492 | (764) | ( | ||
Cost of sales | 10,307 | 12,270 | (1,963) | ( | 37,553 | 44,958 | (7,405) | ( | ||
Gross income | 3,883 | 6,311 | (2,428) | ( | 12,474 | 25,889 | (13,415) | ( | ||
Operating and exploratory expenses | 2,459 | 771 | 1,688 | 4,841 | 3,726 | 1,115 | ||||
Operating income | 1,424 | 5,540 | (4,116) | ( | 7,633 | 22,163 | (14,530) | ( | ||
Financial income (loss), net | (260) | (245) | (15) | (2,481) | (1,670) | (811) | ||||
Share of profit of companies | (4) | 65 | (69) | ( | 88 | 354 | (266) | ( | ||
Income before income tax | 1,160 | 5,360 | (4,200) | ( | 5,240 | 20,847 | (15,607) | ( | ||
Income tax | (659) | 247 | (906) | ( | (1,868) | (5,067) | 3,199 | ( | ||
Net income consolidated before impairment | 501 | 5,607 | (5,106) | ( | 3,372 | 15,780 | (12,408) | ( | ||
Non-controlling interest | (241) | (318) | 77 | ( | (1,154) | (1,251) | 97 | ( | ||
Net income attributable to owners of Ecopetrol before impairment | 260 | 5,289 | (5,029) | ( | 2,218 | 14,529 | (12,311) | ( | ||
(Expense) recovery for impairment of long-term assets | 605 | (1,751) | 2,356 | ( | (621) | (1,748) | 1,127 | ( | ||
Deferred tax of impairment | (190) | 471 | (661) | ( | 91 | 470 | (379) | ( | ||
Net income attributable to owners of Ecopetrol | 675 | 4,009 | (3,334) | ( | 1,688 | 13,251 | (11,563) | ( | ||
EBITDA* | 4,334 | 7,174 | (2,840) | ( | 16,840 | 31,108 | (14,268) | ( | ||
EBITDA Margin | - | ( | - | ( |
* Excluding the effect of expenses associated to the Voluntary Retirement Plan, EBITDA amounts to COP 4,629 billion in 4Q20 and COP 17,471 billion as of year-end.
The figures included in this report were extracted from the Company's audited financial statements. The financial information is expressed in billions of Colombian pesos (COP), or US dollars (USD), or thousands of barrels of oil equivalent per day (mboed) or tons, as noted. For presentation purposes, certain figures in this report were rounded to the nearest decimal place.
Forward-looking statements: This release may contain forward-looking statements related to business prospects, estimates on operating and financial results, and Ecopetrol's growth. These are projections and, as such, are based solely on management's expectations regarding the future of the Company and its continued access to capital in order to finance the Company's business plan. These forward-looking statements basically depend on changes in market conditions, government regulations, competitive pressures, the performance of the Colombian economy and industry, among other factors; therefore, they are subject to change without notice.
The figures included in this report are not audited. The financial information is expressed in billions of Colombian pesos (COP), or US dollars (USD), or thousands of barrels of oil equivalent per day (mboed) or tons, as noted. For presentation purposes, certain figures in this report were rounded to the nearest decimal place.
In words of Felipe Bayón Pardo, CEO of Ecopetrol:
"2020 was a challenging year for the industry, due to the collapse in oil prices stemming from the oversupply caused by disagreements within OPEC+ and later due to the challenges associated with the Covid-19 pandemic. This pandemic was a health emergency at global and local level that was accompanied by a sharp contraction in demand for crude oil and products with multiple social and economic challenges.
Ecopetrol was able to face this unprecedented challenge demonstrating its resilience and capacity to adapt to an adverse and volatile environment, always prioritizing life and the care of our employees.
Our financial results prove it: we closed the year with a COP 16.8 trillion EBITDA and net income of COP 1.7 trillion, being Ecopetrol one of the few companies of the global oil industry with profit for the year. The crisis response plan, which assured operational continuity and led to decisive interventions in costs, prioritization of investments, maximizing revenue and timely financing, allowed to benefit from the recovery of supply and demand of crude oil worldwide in the second half of the year. Thus, leveraged in the business strategy of the Ecopetrol Group (EG) focused on diversifying export destinations and anticipating sales of our crude, we managed to achieve recuperation of realization prices in our export portfolio, which increased
Ecopetrol conducted a disciplined monitoring on its costs and expenses, achieving a balance between optimizations and the availability of resources to guarantee a safe and reliable reactivation of the operation. Thus, the total unit cost for the year 2020 was close to 27 USD/bl, a
In the middle of this challenging environment, during 2020 Ecopetrol Group's maintained a steadfast commitment to the well-being of Colombians and the strengthening of the local economy, in the framework of the health emergency caused by COVID-19. Over COP 88 billion were committed through our social investment program "Apoyo País" (Countrywide Support), of which we allocated
Reserves balance reached 1,770 million barrels of oil equivalent (mboe) reflecting a
In exploration, Ecopetrol completed the drilling of 18 wells, 3 of which were successful, 9 ended the year under evaluation and 6 were dry. The commercial viability for discoveries Andina (in Colombia) and Esox (in the Gulf of Mexico) was approved in 4Q20. The National Hydrocarbons Agency, ANH, approved the transfer of Ecopetrol's
In regard to production, a cumulative average of 697 mboed was reached in 2020, in line with the goal of achieving levels close to 700 mboed. Compared to 3Q20, production in 4Q20 increased thanks to higher sales of LPG and gas, as well as to better performance at Chichimene and Piedemonte fields, despite the impacts by public order and the closure of Castilla's water discharge in December.
With respect to natural gas, a strategic priority for Ecopetrol Group, represented 17 % of the total equivalent production. The EBITDA margin for the year was north of
In turn, the production of unconventional hydrocarbons in Permian contributed an average of 5.2 Mboed in 2020, increasing its share in the total EG's production. We closed the year with 22 wells in production and 22 additional wells drilled, which are expected to be completed and put to work during 1Q21.
Regarding the execution of the Comprehensive Research Pilot Projects – PPII for unconventional hydrocarbons, the first Special Contract for Research Projects - CEPI , was signed with the ANH on December 24, for the Kalé project. This enables the start of the licensing and preparation stage for the execution of Ecopetrol's PPII's in Colombia. In 2021, we will be focused on obtaining environmental licenses and complying with other requirements as established in the robust regulations in force before starting to operate, always informing and including our stakeholders and highlighting the scientific and technical nature of the project.
The annual EBITDA of the upstream segment was COP 6.7 trillion, equivalent to an
The midstream segment obtained results in line with our expectations, with volumes transported in the amount of1,017 mbd, according to the country's production. Also noteworthy are the lower maintenance times for repairing the Caño Limón-Coveñas pipeline, which allowed it to operate more days and without any reversal cycles being necessary in Bicentenario pipeline. The segment reported an EBITDA in the amount of COP 9.3 trillion, equivalent to a 76 % margin.
The downstream segment reached a consolidated throughput load of 355 mbd in 4Q20, the highest of the year. Advancing on the path of fuel quality, in December gasoline production with an average sulfur content of maximum 50 ppm, was achieved, which is lower than the levels requited under current regulations. The operational and commercial performance of the refineries enabled competitive margins in a negative environment for the sector. Likewise, Esenttia records in production and sales, stood-out in 2020. The segment reported an EBITDA of COP 0.9 trillion, equivalent to a
Despite the challenges faced in 2020, our commitment to TESG was strengthened on different fronts. Accumulated reductions of 1.8 MtCO2e were achieved in energy transition, resulting from the implementation of projects which have been running since 2010, thus achieving in advance the goal that was initially set for 2022. On the front of renewable energy, an agreement was signed for the construction of the San Fernando Solar Eco Park, which will have a capacity up to 59 MW and is expected to start operations in 2Q21. In turn, Castilla Solar Eco Park reported savings in operating costs close to COP 3.8 billion in 2020. On the other hand, GHE emissions produced by routine gas flaring were reduced by 19 % as compared to 2019, thus contributing to the commitment to reduce CO2e emissions.
Digital transformation was a fundamental pillar in the operational continuity during the pandemic. It ensured remote connections for more than 15,000 employees, and to hold more than 8,000 virtual meetings, per day, during the year.
In regard to the commitment of strengthening corporate governance, we adhered to the World Economic Forum's Stakeholder Capitalism Metrics (SCM) coalition, a global group of more than 61 companies seeking to harmonize sustainability metrics to facilitate comparisons across companies and industries, on various key issues related to people, environment, prosperity and governance.
In November, Ecopetrol received a 66-point rating on the Dow Jones Sustainability Index (DJSI) scale, ranking 13th in the global integrated oil and gas industry. This score allowed the company to enter the DJSI Latin American Integrated Market – MILA , being the only company in the sector in Latin America to achieve it. In addition, the company received a rating from the CDP Climate Change report in December with a C rating, ranking above the region's overall average performance.
Reflecting our ability to adapt and to react to the changing conditions of a particularly complex market, we updated our 2021-2023 Organic Business Plan, which aims at ensuring a profitable growth for Ecopetrol on a Brent price path of USD 45 per barrel by 2021, and USD 50 per barrel onwards. The plan also seeks to increase competitiveness, to strengthen the energy transition agenda and to deepen TESG as one of the strategic pillars for our operation.
The following elements stand out within the organic component of the new plan: i) an investment ranging from USD 12,000 to USD 15,000 million, funded mainly with internal cash generation; ii) profitable production levels close to 750 Mboed by 2023 maintaining focus on the development of fields with the greatest impact on our value chain in Colombia, the growth of Permian, the drilling of more than 40 exploratory wells and the continuity of our successful enhanced recovery program; iii) volumes transported in excess of one million barrels per day reflecting positive expectations of economic growth; iv) joint throughput of refineries ranging from 340 to 365 thousand barrels per day in 2021, seeking to reach around 420 thousand barrels per day in 2023, with the IPCC ; v) reduction of 3 MtCO2 as of 2023 and redefining medium and long term emission reduction goals during 2021; vi) increasing generation capacity with renewable energies around 400 MW by 2023; and vii) social and environmental investments for COP 1.7 trillion between 2020 and 2024. Similarly, we will invest between USD 100 and USD 150 million in innovation and technology to accelerate the digital transformation. This plan is aligned with our cultural principles: life first, ethics, passion for excellence, making the impossible possible, leadership and inclusion, as well as teamwork. Similarly, it responds to the challenges of the environment with a focus on sustainability and ensures a strategy that adds value to EG and the country.
On the other hand, on January the 27, 2021, the Company announced its interest in acquiring
The eventual acquisition of the stake in ISA responds to Ecopetrol's strategic interest of entering into new businesses aligned with the opportunities for electrification and decarbonization, dictated by the energy transition, and which in turn leverage the Group's profitable growth and improve its business risk profile.
The stake in ISA would allow Ecopetrol's stockholders to achieve a material position in an established company, leader in a strategic sector for the energy transition, with a world-class portfolio, a first-rate leadership team, and proven corporate governance. Through a single transaction, Ecopetrol would position itself in a key link in the electricity business with clear prospects for future growth. Furthermore, a business with similar characteristics to the oil infrastructure one, in which Ecopetrol already participates through its subsidiary Cenit, could also be added to EG's portfolio. These businesses are capital intensive, regulated, with significant entry barriers, and margins and competitive capital returns that provide stability to the cash flow, relative to hidrocarbons price volatility.
The acquisition would be partially financed with a stock issuance whose specific purpose is to fund this opportunity of growth and consolidation. This would allow Ecopetrol to undertake a transformational opportunity without changing the investment plans in its core oil & gas business, and without impacting the debt ratios that support its investment grade.
Moving forward, in case of succeeding in the transaction, we envision a more robust Ecopetrol, with a solid position in oil, gas, energy infrastructure and low-emission energy. The Company will continue to focus on the hydrocarbons business, with a growing share of
gas. Renewable generation for self-consumption will continue to be key for reducing operating costs and emissions footprint. We will increase our level of ambition in decarbonization in terms of reducing emissions, and we will move forward with the evaluation of new technologies and business models, such as natural climate solutions, CCUS (Carbon Capture, Use and Storage) and green hydrogen.
That said, we have started 2021 with a solid financial position, strengthened after the crisis, with expectations of profitable and sustainable growth on all fronts of the business, and with the clear aspiration to materialize a transformational opportunity for the Company through the potential acquisition of the stake in ISA. This plan addresses the challenges and opportunities of the environment, keeping our promise to create value for our shareholders and stakeholders, leveraged on the pillars of growth, capital discipline and cash protection, all supported on TESG.
Felipe Bayón Pardo
CEO
Ecopetrol SA".
To review the full report please visit the following link: https://www.ecopetrol.com.co/wps/wcm/connect/f662b0b6-8025-480e-a6a6-adea697ee66f/Reporte+4T20+ENG+limpio.pdf?MOD=AJPERES&attachment=false&id=161411587720
Ecopetrol is Colombia's largest firm and is an integrated oil company that is among the 50 largest in the world and the four largest in Latin America. In addition to Colombia, where it generates over
For further details, please contact:
Acting Head of Capital Markets
Juan Pablo Crane
Phone: +571-234-5190
Email: investors@ecopetrol.com.co
Media Engagement (Colombia)
Jorge Mauricio Tellez
Phone: + 571-234-4329
Email: mauricio.tellez@ecopetrol.com.co
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SOURCE Ecopetrol S.A.
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