Ecopetrol Group Announces Second Quarter 2021 Results

Rhea-AI Summary

Ecopetrol reported impressive financial results for Q2 2021, achieving consolidated revenue of COP 19.4 trillion and net income of COP 3.7 trillion, marking increases of 130.3% and 1,243.8%, respectively, from the previous year. The EBITDA was COP 9.4 trillion with an EBITDA margin of 48.5%. For H1 2021, total revenues reached COP 36.7 trillion, with net income quadrupling from 2020. Enhanced operational efficiency and favorable market conditions supported these results. However, production decreased by 5.3% due to public unrest in Colombia and other challenges.

Positive

• Consolidated revenue increased by 130.3% year-over-year in Q2 2021.
• Net income reached COP 3.7 trillion, a rise of 1,243.8% from Q2 2020.
• EBITDA was COP 9.4 trillion, marking a significant 372.3% improvement.
• Achieved cost efficiencies totaling COP 1.0 trillion focused on EBITDA margin expansion.
• Established a new commercialization company in Singapore to enhance market presence.

Negative

• Average production decreased by 5.3% compared to H1 2020, primarily due to public order issues in Colombia.
• Continued lower production from Castilla field due to operational restrictions.

BOGOTÁ, Colombia, Aug. 3, 2021 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) announced today the Ecopetrol Group's financial results for the second quarter and the first half of 2021. The financial results were prepared in accordance with the International Financial Reporting Standards applicable in Colombia.

 

Table 1 Financial Summary Income Statement - Ecopetrol Group
Billion (COP)		2Q 2021	2Q 2020	∆ ($)	∆ (%)		6M 2021	6M 2020	∆ ($)	∆ (%)
Total sales		19,444	8,442	11,002	130.3%		36,650	23,514	13,136	55.9%
Depreciation and amortization		2,328	2,236	92	4.1%		4,566	4,388	178	4.1%
Variable cost		6,761	3,570	3,191	89.4%		12,999	10,266	2,733	26.6%
Fixed cost		2,342	1,810	532	29.4%		4,378	4,249	129	3.0%
Cost of sales		11,431	7,616	3,815	50.1%		21,943	18,903	3,040	16.1%
Gross income		8,013	826	7,187	870.1%		14,707	4,611	10,096	219.0%
Operating (net of income) and exploratory expenses		1,458	2	1,456	72,800.0%		2,640	1,081	1,559	144.2%
Operating income		6,555	824	5,731	695.5%		12,067	3,530	8,537	241.8%
Financial income (loss), net		(831)	(599)	(232)	38.7%		(1,484)	(1,265)	(219)	17.3%
Share of profit of companies		62	77	(15)	(19.5%)		115	77	38	49.4%
Income before income tax		5,786	302	5,484	1,815.9%		10,698	2,342	8,356	356.8%
Income tax		(1,768)	(3)	(1,765)	58,833.3%		(3,303)	(633)	(2,670)	421.8%
Net income consolidated		4,018	299	3,719	1,243.8%		7,395	1,709	5,686	332.7%
Non-controlling interest		(295)	(277)	(18)	6.5%		(587)	(624)	37	(5.9%)
Net income attributable to owners of Ecopetrol before impairment		3,723	22	3,701	16,822.7%		6,808	1,085	5,723	527.5%
(Expense) recovery for impairment long-term assets		1	4	(3)	(75.0%)		3	(1,204)	1,207	100.2%
Deferred tax of impairment		0	(1)	1	100.0%		(1)	277	(278)	100.4%
Net income attributable to owners of Ecopetrol		3,724	25	3,699	14,796.0%		6,810	158	6,652	4,210.1%
EBITDA		9,428	1,996	7,432	372.3%		17,615	7,253	10,362	142.9%
EBITDA Margin		48.5%	23.6%	-	24.9%		48.1%	30.8%	-	17.3%

The figures included in this report were extracted from the Company's unaudited 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.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

The strength of Ecopetrol Group's results in the quarter and year to date, despite a challenging situation derived from the public order situation and the health emergency associated with the third peak of the COVID-19 pandemic, reiterates our capacity to generate sustainable value, and to quickly and timely respond to environment conditions.

The result for the second quarter of 2021 is the best ever recorded in the history of the Ecopetrol Group, with a consolidated revenue of COP 19.4 trillion, a net income of COP 3.7 trillion, an EBITDA of COP 9.4 trillion, and an EBITDA margin of 48.5%. In the first half of the year, we recorded a consolidated revenue of COP 36.7 trillion, a net income of COP 6.8 trillion (4.0 times the net income generated throughout 2020), an EBITDA of COP 17.6 trillion, and an EBITDA margin of 48.1%.

In addition to the favorable fundamental variables observed in the quarter (Brent of 69.1 USD/Bl and Average Exchange Rate of 3,691 COP/USD), our continued commitment to cost optimization and capturing efficiencies, as well as an excellent performance of our commercial strategy, supported the results achieved. At the end of the first half of the year, the Group realized COP 1.0 trillion in efficiencies focused on strengthening EBITDA margin and capex savings.

Additionally, as part of our commercial strategy and in order to capture new customers and destinations for our crude oil and products, and thus consolidate our diversification strategy, during the second quarter we announced the incorporation of a new commercialization company based in Singapore, with which we seek to strengthen our operations in the Asian market.

In exploration, Ecopetrol and its partners completed the drilling of 8 wells during the first half of the year, highlighting, for the second quarter, the drilling of the Boranda Centro-1 exploratory well, operated by Parex, and the Chimuelo-1 and Flamencos-3 wells operated by Ecopetrol, all under evaluation. The cumulative production of the exploratory assets reached 908,535 boe (5,020 boed on average) during the first half of the year, where 67% of the production corresponded to oil and 33% to gas. In the Brazilian Pre-Salt, we continued to advance in the commercial feasibility studies and development plan for the Gato do Mato discovery.

Ecopetrol Group's average production was 668.4 mboed in the first half of 2021, 5.3% less than the same period of last year, primarily as a result of i) impacts from the public order situation Colombia experienced during the months of May and June, and ii) the temporary lower production from Castilla, field that has been gradually recovering after overcoming a restriction associated with water management. Production in the second quarter was 660.9 mboed, decreasing 2.5% as compared to the second quarter of 2020. During the first six months of the year, 179 development wells were drilled and completed.

Natural gas and LPG production increased 10.2% as compared to the first half of 2020 and 8.2% as compared to the second quarter of the previous year, mainly leveraged on the higher production of Piedemonte, Hocol and Permian (United States). During second quarter, the contribution of gas and LPG to the total production was 20.6%, with a combined EBITDA margin of 54.1%.

Regarding our operations in the Permian basin in the United States, we highlight the start of production of 31 new wells during the quarter, for a total of 75 wells since the start of the operation (22 in 2020 and 53 by the first half of 2021). Likewise, we highlight the contribution of 21.2 mboed before royalties during the second quarter of 2021, equivalent to 16.1 mboed net to Ecopetrol after royalties.

At the end of the quarter, the transfer of interest for cross operation with ExxonMobil in the Comprehensive Research Pilot Project in Unconventional Reservoirs Kalé and Platero, located in the Municipality of Puerto Wilches (Santander) was approved, leaving Ecopetrol as operator with a 62.5% interest in Kalé and 37.5% in Platero. In Kalé, meetings with the communities were held in order to share the description and scope of the project within the development of the Environmental Impact Assessment, while in Platero, the first territorial dialogue was held jointly with the National Government and ExxonMobil.

In the midstream segment, the volume transported during the semester was 983.6 mbd, decreasing 4.6% as compared to the first half of 2020, impacted by the lower crude oil production in the country, mainly in the Llanos region, as well as by the public order situation previously mentioned. During the second quarter of the year, the transported volume was 959.9 mbd, volume that despite the situation, compares favorably with the results of the same period of 2020. In April, the TLU-2 marine platform was inaugurated at the Coveñas Maritime Terminal, providing the Ecopetrol Group with one of the most robust and advanced systems for loading offshore vessels.

The downstream segment was influenced by the positive performance of all business units, leveraged by the stability of operations, the recovery of product demand and crude oil supply to the country, and the excellent performance of Esenttia. With the gradual recovery of demand, the refineries reached similar consolidated throughput levels in the first two quarters of the year (around 360 mbd), with an integrated gross margin of 9.8 USD/Bl for the first half of 2021.

On the TESG front, we continued to make progress in each of the strategy's pillars.

In the environmental front, particularly in renewable energy projects, we highlight: i) the 75% progress on the construction of the San Fernando solar park, expected to enter into modular operation (sequentially) in September, ii) the advance in the assignment process under PPA¹ strategies for solar energy projects for 45 MW in Huila, Middle Magdalena and Meta, for which bids are expected for August, iii) advances in the allocation of measurement contracts for the wind generation prospects in Araguaney (Casanare) and Huila, iv) progress in the structuring of the Rubiales solar park, which will be published to the market in August, v) the completion of the conceptual engineering of the photovoltaic solar solution for Providencia island, and vi) the consolidation of savings derived from the Castilla solar park for more than COP 5.9 billion (USD 1.6 million) and a reduction in CO2 emissions of more than 16,000 tons. In other milestones, we highlight the fulfillment of 68% of the established target for 2021 under the national initiative "Sembrar Nos Une" (2,762,032 trees sown) in the first half of the year.

In the social dimension, the Company allocated social investment resources for a total of COP 150 billion during the first half of the year, as part of its environment strategy. Reiterating the company's commitment to the health and safety of its employees, the Ecopetrol Group joined the private initiative of vaccination against COVID-19, acquiring 26,200 doses to distribute among its employees, their families and allies.

On the corporate governance front, Ecopetrol made official its interest in participating in the Dow Jones Sustainability Index (DJSI), reporting again to the Corporate Sustainability Assessment of S&P Global, for which results are expected in November. In addition, in May we published the first Index Content that responds to the Stakeholder Capitalism Metrics of the World Economic Forum (WEF) and the International Business Council (IBC).

Regarding Digital Transformation, lever of the TESG strategy, during the first half of 2021 we implemented projects that have allowed to capture and certify benefits derived from their impact on the Company's processes and operations, for USD 20.5 million, with a 120% fulfillment of the target set for this semester.

In relation to the potential acquisition of the Government's 54.1% ownership stake in ISA, on June 23, 2021 we announced to the market the extension of the term of the Exclusivity Agreement until August 31, 2021. Likewise, the decision of not conditioning the closing of the potential acquisition of ISA on a potential equity offering, in line with the favorable evolution of the financial situation of Ecopetrol Group. Furthermore, on July 30, 2021, we presented a binding offer for the mentioned acquisition. As soon as we receive a formal response from the Ministry, we will inform the market.

Likewise, during the rest of 2021, we expect to continue working towards the objectives of restoring the growth path of both production and reserves, increasing competitiveness, laying the foundations of energy transition and deepening our TESG agenda, in line with the goals established in the 2021-2023 Business Plan.

To review the full report please visit the following link:
http://www.ecopetrol.com.co/wps/wcm/connect/3486be40-e4f0-4dc7-aaa6-0c1b53068268/ENG+-+Resultados+Ecopetrol+2T21.pdf?MOD=AJPERES&attachment=false&id=1628025094204

Ecopetrol is the largest company in Colombia and one of the main integrated oil and gas conglomerates in Latin America, with more than 13,000 employees. It accounts for more than 60% of the hydrocarbon production in Colombia, and it owns the largest refineries and most of the country's oil-pipelines and multi-purpose pipelines network. It also participates in the commercialization of energy and in the distribution of gas. At the international level, Ecopetrol focuses on strategic basins on the American continent, with E&P operations in the United States (the Permian basin and the Gulf of Mexico), Brazil and Mexico. This press release contains statements relating to business prospects, estimates of operating and financial results, and Ecopetrol's growth prospects. All are projections, and therefore are based solely on management's expectations of the company's future and its continuous access to capital to finance its sales plan. Achieving these estimates in the future depends on its performance under given market conditions, regulations, competition, the performance of the Colombian economy and industry, and other factors; therefore, they are subject to change without prior notice. 

For further details, please contact: 

Head of Capital Markets (A) 
Lina María Contreras Mora
Phone: +571-234-5190 
Email: investors@ecopetrol.com.co 

Media Engagement (Colombia) (A)
Alexandra Santamaria Molano
Phone: + 571-234-4329 
Email: alexandra.santamaria@ecopetrol.com.co

¹ Power Purchase Agreement

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SOURCE Ecopetrol S.A.

FAQ

What were the financial results of Ecopetrol in Q2 2021?

Ecopetrol reported a consolidated revenue of COP 19.4 trillion and a net income of COP 3.7 trillion in Q2 2021.

How much did Ecopetrol's net income grow in the first half of 2021?

Ecopetrol's net income for the first half of 2021 was COP 6.8 trillion, quadrupling compared to the same period in 2020.

What was Ecopetrol's EBITDA margin for Q2 2021?

The EBITDA margin for Ecopetrol in Q2 2021 was 48.5%.

How did public unrest affect Ecopetrol's production?

Ecopetrol's average production decreased by 5.3% in H1 2021 primarily due to public order situations in Colombia.

What strategic initiative did Ecopetrol announce in Q2 2021?

Ecopetrol announced the establishment of a new commercialization company in Singapore to enhance its market reach.