Ecopetrol's 2023 Earnings Distribution Proposal

Rhea-AI Summary

Ecopetrol S.A. proposes the distribution of 2023 earnings, with a net income of COP 19.06 trillion. The proposal includes an ordinary dividend of COP 278 per share and an extraordinary dividend of COP 34 per share, totaling COP 312 per share. The company plans to pay dividends in three installments to minority shareholders and in full to the majority shareholder by December 31, 2024. Additionally, an occasional reserve of COP 11.99 trillion is allocated to enhance financial sustainability.

Positive

• Ecopetrol proposes a dividend distribution based on 2023 earnings, with an ordinary dividend of COP 278 per share and an extraordinary dividend of COP 34 per share.
• The company plans to pay dividends to minority shareholders in three installments and to the majority shareholder by December 31, 2024.
• An occasional reserve of COP 11.99 trillion is allocated to support Ecopetrol's financial sustainability and strategic execution.

Negative

• None.

Insights

Financial Analyst

The proposed distribution of earnings by Ecopetrol S.A. represents a significant event for shareholders, as it directly affects shareholder value through the disbursement of dividends. The ordinary dividend payout of 60.0% of net income aligns with the company's established dividend policy, indicating a stable financial strategy. The additional extraordinary dividend of 7.3% is a reflection of the company's solid operating and financial performance. The combined total dividend of COP 312 per share, being the second highest in the company's history, suggests robust earnings and a strong commitment to returning value to shareholders.

From a financial perspective, the allocation to an occasional reserve for sustainability is a prudent move, earmarking funds for future financial flexibility. This can be interpreted as a strategic reserve to hedge against potential downturns or to fund future growth initiatives. The impact on the stock market will likely be positive as investors often view generous dividend payouts and financial prudence as indicators of a company's health and management's confidence in its future prospects.

Market Research Analyst

Ecopetrol's position as the largest company in Colombia and a key player in the American continent's energy sector is critical to understanding the broader implications of their earnings distribution. The company's diverse portfolio, including hydrocarbon production, energy transmission and international operations, provides a level of stability and potential for growth. The substantial dividend may attract income-focused investors, potentially increasing demand for Ecopetrol's shares. Additionally, the strategic allocation to sustainability reserves underscores the company's commitment to long-term financial health and operational resilience, which can be appealing to ESG (Environmental, Social and Governance) investors.

It is important to monitor how this earnings distribution aligns with industry norms, particularly in the energy sector, where companies balance shareholder returns with reinvestment in exploration and development. Ecopetrol's strategy appears to strike this balance, which could set a precedent for similar companies in the region. The staggered payment of dividends could also provide a steady income stream for minority shareholders throughout the year, potentially increasing the attractiveness of the stock.

Energy Sector Analyst

The energy sector is highly cyclical and sensitive to global market dynamics, such as oil prices and geopolitical events. Ecopetrol's distribution of earnings, particularly the allocation to an occasional reserve for sustainability, demonstrates foresight in managing the inherent volatility of the energy market. This reserve can serve as a buffer during periods of low oil prices or unexpected operational challenges. Such strategic financial management is essential in the energy sector, where companies must balance short-term returns with the long-term capital investments necessary for exploration and infrastructure maintenance.

Investors will be interested in how Ecopetrol's financial decisions, influenced by its performance in strategic basins and international ventures, reflect on the company's ability to navigate the energy transition and maintain profitability. The company's investments in transmission and telecommunications through ISA also diversify its revenue streams, which could mitigate risks associated with the core hydrocarbon business. This diversified approach may provide a competitive edge and influence investor confidence in the company's ability to sustain dividends and growth over time.

BOGOTA, Colombia, Feb. 29, 2024 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) ("Ecopetrol" or the "Company") hereby communicates the Company's proposal for the distribution of 2023 earnings, which has been approved by the Company's board of directors, and will be submitted for the consideration of the General Shareholders' Meeting that will take place on March 22, 2024:

 

2023 EARNINGS DISTRIBUTION PROPOSAL
(Colombian Pesos- COP)
Net income after provision for income tax	19,062,090,905,658
+ Release of reserves from previous years	8,174,839,184,265
Occasional reserve for sustainability	7,665,757,580,902
Excess fiscal depreciation reserve (Art.130 ET.)	509,081,603,363
- Legal reserves of the current year	2,415,290,693,929
Legal reserve (10%)	1,906,209,090,566
Excess fiscal depreciation reserve (Art. 130 ET.)	509,081,603,363
Available to the Shareholders	24,821,639,395,994
It is proposed to distribute as follows:
For dividend payments:
Ordinary Dividend -According to dividend policy (Payout1 60.0% of Net Income)	11,430,441,123,874
Extraordinary Dividend (Payout 2 7.3% of Net Income)	1,397,967,619,467
Subtotal (Total payout of 67.3%):	12,828,408,743,341
Allocated to occasional reserve for sustainability:	11,993,230,652,653
	24,821,639,395,994
Total:
Total ordinary dividend payable per share	278
Total extraordinary dividend payable per share	34
Total dividend payable	312

¹ A 60.0% dividend payout ratio established in the policy was applied to net income, resulting in a dividend per share with decimals, which was rounded to the nearest number in COP/share resulting in a payout not surpassing 60%. The payout percentage shown is rounded to the first decimal place.

² A 7.3% extraordinary dividend was applied to net income, resulting in a dividend per share with decimals, which was rounded to the nearest number in COP/share. The payout percentage shown is rounded to the first decimal place.

The earnings distribution proposal, consistent with the Company's current dividend policy, proposes an ordinary dividend distribution of 60.0%¹ of Ecopetrol's net income in 2023, equivalent to COP 278 per share.

Additionally, the Board of Directors of the Company, taking into consideration the solid operating and financial performance in all of Ecopetrol's business lines, is also proposing an extraordinary dividend of 7.3%² of Ecopetrol's Net Income in 2023, equivalent to COP 34 per share, for a cumulative total dividend of COP 312 per share, which distribution would be the second highest in the Company's history.

The payment of dividends to minority shareholders will be made in three equal installments on April 25, September 26 and December 19, 2024. On the other hand, the dividend due to our majority shareholder is expected to be applied in full no later than December 31, 2024.

Likewise, the Board of Directors proposes the allocation of COP 11,993,230,652,653 to an occasional reserve to support the Company's financial sustainability and flexibility in the execution of its strategy.

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, reserves, 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 Capital Markets
Carolina Tovar Aragon Correo
Email: investors@ecopetrol.com.co

Head of Corporate Communications
Marcela Ulloa Beltran
Email: marcela.ulloa@ecopetrol.com.co

View original content:https://www.prnewswire.com/news-releases/ecopetrols-2023-earnings-distribution-proposal-302076538.html

SOURCE Ecopetrol S.A.

FAQ

What is the proposed ordinary dividend per share for Ecopetrol based on the 2023 earnings?

The proposed ordinary dividend per share for Ecopetrol based on the 2023 earnings is COP 278.

What is the proposed extraordinary dividend per share for Ecopetrol based on the 2023 earnings?

The proposed extraordinary dividend per share for Ecopetrol based on the 2023 earnings is COP 34.

How will the dividends be paid to minority shareholders?

The dividends to minority shareholders will be paid in three equal installments on April 25, September 26, and December 19, 2024.

When is the dividend due to the majority shareholder expected to be paid in full?

The dividend due to the majority shareholder is expected to be paid in full no later than December 31, 2024.

What is the purpose of allocating COP 11.99 trillion to an occasional reserve?

The purpose of allocating COP 11.99 trillion to an occasional reserve is to support Ecopetrol's financial sustainability and flexibility in executing its strategy.