S&P maintains Ecopetrol's credit rating at BB+ and changes its outlook from stable to negative

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S&P Global Ratings has changed the outlook for Ecopetrol's credit rating from stable to negative, in response to Colombia's credit rating outlook also changing to negative. The company's global rating is maintained at 'BB+' with an independent credit profile of 'bbb-', and no changes are expected in the next 12 months. Ecopetrol remains a significant player in the Colombian economy, but its rating will correlate to that of Colombia. The report issued by S&P on January 18, 2024, will be published in a future statement.

Insights

Financial Analyst

The revision of Ecopetrol's credit rating outlook from stable to negative by S&P Global Ratings is a significant development for investors and stakeholders. This change indicates a perceived increased risk associated with Ecopetrol's ability to meet its financial obligations. The maintenance of the 'BB+' rating suggests that the company remains investment-grade, but the negative outlook flags potential downgrades if the situation worsens. Investors should monitor the company's debt levels, interest coverage ratios and cash flow generation capabilities, as these will be critical in determining the company's future creditworthiness.

It's important to note that Ecopetrol's rating is tied to the sovereign credit rating of Colombia. Therefore, macroeconomic factors such as GDP growth, fiscal policy and external shocks that affect the country's economy could indirectly influence Ecopetrol's financial health. Given the company's strategic importance in Colombia, any changes in government policy or shifts in the regulatory landscape could also have material implications for its operations and financial performance.

Energy Sector Analyst

Ecopetrol's position as a leading integrated energy company in the Americas, with a diversified portfolio spanning hydrocarbon production, energy transmission and various international ventures, places it at the crossroads of several industry-specific risks and opportunities. The negative outlook could affect investor sentiment, potentially making capital more expensive and affecting Ecopetrol's ability to finance its growth strategies, including its international expansion and diversification into energy transmission.

Given the global transition towards renewable energy, Ecopetrol's investments in sectors such as petrochemicals and gas distribution, as well as its acquisition of ISA, signal a strategic pivot that could mitigate long-term risks associated with the hydrocarbon sector. However, this diversification must be balanced against the immediate pressures of maintaining a robust financial profile amidst a challenging credit outlook.

Economist

The negative outlook on Ecopetrol's credit rating by S&P could be reflective of broader economic challenges facing Colombia. As the largest company in Colombia, Ecopetrol's performance is closely linked to national economic conditions, including currency fluctuations, trade balances and commodity price volatility. The energy sector's cyclical nature means that Ecopetrol's revenues can be highly sensitive to global oil prices, which are influenced by geopolitical events, OPEC decisions and shifts in energy demand.

Investors should consider the potential impact of Colombia's economic policies and stability on Ecopetrol's operations. Fiscal reforms, taxation policies and government spending can all influence the company's financial results. Additionally, the ability of the Colombian government to implement reforms and attract foreign investment can have a cascading effect on Ecopetrol's growth prospects and its ability to sustain investment-grade credit metrics.

BOGOTA, Colombia, Jan. 19, 2024 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) informs that S&P Global Ratings ("S&P") modified the outlook of Ecopetrol's credit rating from stable to negative, as a result of the review in the outlook of Colombia's credit rating, also from stable to negative.

Likewise, S&P confirmed that Ecopetrol's global rating is maintained at 'BB+' and ratified its independent credit profile (Stand-Alone) with investment grade at 'bbb-', stating that a review of Ecopetrol's independent profile is not expected during the next 12 months.

Finally, S&P has stated that Ecopetrol will continue to play an important role in the Colombian economy, and given the Government's participation in the company, its rating will correlate to that of Colombia.

The report issued by S&P on January 18, 2024 announcing the change in the rating outlook will be published in a future statement.

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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.

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 is the current outlook for Ecopetrol's credit rating according to S&P Global Ratings?

The outlook for Ecopetrol's credit rating has been changed from stable to negative by S&P Global Ratings.

What is Ecopetrol's current global rating?

Ecopetrol's global rating is maintained at 'BB+' by S&P Global Ratings.

What is the independent credit profile of Ecopetrol?

Ecopetrol has an independent credit profile of 'bbb-' according to S&P Global Ratings.

What is the expected change in Ecopetrol's independent profile in the next 12 months?

No changes are expected in Ecopetrol's independent profile in the next 12 months according to S&P Global Ratings.

How does Ecopetrol's rating correlate to that of Colombia?

Ecopetrol's rating will correlate to that of Colombia due to the Government's participation in the company according to S&P Global Ratings.