ECOPETROL S.A. reports United Kingdom court's decision and expected Dutch court's decision related to restructuring plans of McDermott's subsidiaries and Reficar's arbitral award

Rhea-AI Summary

Ecopetrol's subsidiary Refineria de Cartagena S.A.S. (Reficar) receives approval for restructuring plan from UK court, potentially gaining 19.9% of McDermott International Ltd.'s common stock. Ecopetrol, a major energy company in Colombia, operates in various segments domestically and internationally.

Insights

Financial Analyst

The court's approval of CB&I UK Limited's restructuring plan and the potential acquisition of a 19.9% stake in McDermott International Ltd. by Reficar represent significant financial restructuring and strategic investment moves. From a financial perspective, the conversion of debt into equity is a common strategy in corporate restructuring, as it allows the debtor company to reduce its immediate cash outflows and provides the creditor with potential upside from equity appreciation.

However, this transaction raises questions about the valuation of the equity stake and its potential impact on Ecopetrol's balance sheet. The 19.9% ownership does not confer controlling interest, but it is substantial enough to warrant significant influence, potentially allowing Reficar to appoint board members and influence McDermott's corporate decisions. It is also essential to consider the volatility and risks associated with the energy sector, which could affect the future value of McDermott's shares.

Investors should monitor subsequent financial disclosures from Ecopetrol to assess the impact of this transaction on its financial statements, particularly concerning asset valuation, potential dilution of earnings per share and any changes in debt levels.

Legal Expert

The legal implications of the UK court's decision and the anticipated Dutch court approval involve complex international arbitration and insolvency law. The discharge of CB&I UK Limited's payment obligation through court-approved restructuring highlights the role of cross-border legal mechanisms in resolving international commercial disputes. For stakeholders, this outcome underscores the importance of understanding the legal risks associated with international contracts and the potential for arbitration awards to be affected by insolvency proceedings.

Additionally, the legal precedent set by this case may influence future restructuring negotiations involving multinational corporations. Stakeholders should be aware of the legal intricacies that could impact the enforceability of arbitral awards and the strategies companies may employ to manage their liabilities through restructuring.

Market Research Analyst

The strategic implications for Ecopetrol and its subsidiary Reficar in acquiring a stake in McDermott International Ltd. extend beyond immediate financial considerations. This move could potentially reshape Ecopetrol's market positioning and diversification strategy, especially given McDermott's role in the global energy infrastructure sector. The acquisition of shares in lieu of cash settlement from the arbitration may be a calculated risk to expand Ecopetrol's influence and operational capabilities in key markets.

It is crucial to evaluate how this alignment with McDermott might complement Ecopetrol's existing portfolio and whether it aligns with its long-term strategic goals, such as enhancing its presence in the American continent's energy sector. The potential synergies, market expansion opportunities and diversification benefits should be weighed against the inherent risks of entering a partnership with a recently restructured company.

BOGOTA, Colombia, Feb. 28, 2024 /PRNewswire/ -- Ecopetrol informs that on February 27, 2024 its subsidiary Refineria de Cartagena S.A.S. (Reficar) was notified of the decision of a United Kingdom court to approve the restructuring plan of CB&I UK Limited, a subsidiary of McDermott International Ltd., and consequently to discharge CB&I UK Limited's payment obligation to Reficar under the arbitral award of June 2, 2023.

Separately, it is expected that in March 2024 a Dutch court will approve a restructuring plan submitted by an independent expert appointed by such court for Chicago Bridge & Iron Company N.V. (CB&I N.V.), another subsidiary of McDermott International Ltd.  If the restructuring plan is approved as submitted, Reficar could receive, among others, preferred shares convertible into 19.9% of the common stock of McDermott International Ltd. in satisfaction of CB&I N.V.'s payment obligation to Reficar under the arbitral award of June 2, 2023.

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 forward-looking statements which are based on current expectations and assumptions about future events and which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "estimate", "intend", "continue", or "believe" or other words of similar import, and which forward-looking statements also include certain projections, forecasts, budgets and other estimates. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond the Ecopetrol's control. Ecopetrol does not undertake any obligation to provide any additional information or to update this press release or to correct any inaccuracies that may become apparent, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release.

For more information, please contact:

Head of Capital Markets
Carolina Tovar Aragón
Email: investors@ecopetrol.com.co

Head of Corporate Communications (Colombia)
Marcela Ulloa
Email: marcela.ulloa@ecopetrol.com.co

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SOURCE Ecopetrol S.A.

FAQ

What decision was made by the United Kingdom court regarding Reficar's payment obligation?

The UK court approved the restructuring plan of CB&I UK Limited, discharging its payment obligation to Reficar under an arbitral award.

What is the potential outcome for Reficar in March 2024 according to the press release?

Reficar could receive preferred shares convertible into 19.9% of McDermott International Ltd.'s common stock if a restructuring plan for CB&I N.V. is approved by a Dutch court.

What percentage of ISA's shares did Ecopetrol acquire?

Ecopetrol acquired 51.4% of ISA's shares.

In which countries does Ecopetrol have Drilling and Exploration operations?

Ecopetrol has operations in the United States (Permian basin and the Gulf of Mexico), Brazil, and Mexico.

Where does Ecopetrol hold leading positions in the power transmission business?

Ecopetrol holds leading positions in the power transmission business in Brazil, Chile, Peru, and Bolivia.

What sectors does Ecopetrol participate in internationally through ISA and its subsidiaries?

Ecopetrol participates in the power transmission business, road concessions, and the telecommunications sector internationally through ISA and its subsidiaries.