Wednesday, February 24, 2021

Oil majors can only admire Colombia’s titan

Global oil majors can only sit back and admire Colombia’s titan. State-controlled Ecopetrol just reported a 37 percent jump in first-quarter earnings and a 50 percent EBITDA margin that exists in the dreams of the likes of ExxonMobil.

Replacing reserves will be tricky for Ecopetrol going forward, but the company, now worth a whopping $135 billion, still looks like the best oil play in Latin America.

- Advertisement -

The numbers tell an engaging story. Ecopetrol oil extraction costs are at least 40 percent cheaper than the industry norm. It managed to increase production by 11 percent in the latest quarter, while Exxon’s volume dropped. Ecopetrol’s replacement rate, at 1.6 barrels for every barrel produced, and 38 percent return on equity also far exceeded those of its larger U.S. rival.

It won’t be news to Ecopetrol’s existing shareholder base, which enjoys the 70 percent payout ratio and a 5.5 percent dividend yield. Its U.S.-listed certificates are up by over 50 percent this year. Healthy growth is also priced in, as Ecopetrol trades at nearly eight times trailing EBITDA, miles ahead of its larger cousins. Even Brazil’s Petrobras, widely considered the region’s benchmark oil producer, only fetches a multiple of a little over six.

The company’s secret sauce is its rock-bottom on-shore extraction costs. It’s a luxury not afforded to most listed companies that spend large amounts of cash seeking new reserves around the world, including expensive ones located deep beneath the ocean. Ecopetrol has been replacing reserves on the cheap, but their lifespan, at six to seven years, is the company’s one noticeable lag among peers. Ongoing guerrilla attacks on its infrastructure are another significant risk.

Ecopetrol says it hopes to triple reserves by 2020. With so much unexplored territory in Colombia, it just might get there. The company now commands the same market value as BP. If Colombia’s government can keep Marxist rebels at bay, Ecopetrol could also give other industry giants a run for their money.

- Advertisement -

By Raul Gallegos

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

- Advertisement -

FACT CHECK:
We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

Rico
"Rico" is the crazy mind behind the Q media websites, a series of onlinemagazines that includes TodayColombia.com. Rico brings his special kind of savvy to online marketing. His websites are engaging, provocative, informative and sometimes off the wall, where you either like or you leave it. The same goes for him, like him or leave him.There is no middle ground. No compromises, only a passion to present reality as he sees it!

Related Articles

Bogotá, Medellín and Cali: the cities with the most violations of measures against covid-19

QCOLOMBIA - Since the mandatory isolation began in Colombia, 1,400,387 finess...

What happens if a Colombian does not attend the scheduled covid-19 vaccination appointment?

QCOLOMBIA - A few days after starting the National Vaccination Plan,...

MOST READ

What happens if a Colombian does not attend the scheduled covid-19 vaccination appointment?

QCOLOMBIA - A few days after starting the National Vaccination Plan, Colombians still have some doubts regarding their immunization process and there is fear...

We do not move even half the passengers we would have on a normal day: Transmilenio manager

QCOLOMBIA - The public transport system in Colombia has been one of the worst-hit sectors since the start of the coronavirus pandemic, as quarantines...

Colombia Suffered Its Deepest Slump Since 1905 Last Year

(Bloomberg) -- Colombia’s economy suffered its deepest contraction in more than a century last year, leaving it wracked by soaring debt, mass unemployment and...

Colombia receives first batch of vaccines

QCOLOMBIA - Colombia advanced the start of the immunization campaign against the coronavirus to February 17, three days ahead of schedule, after receiving the...

There’s A Good Chance Your Valentine’s Flowers Come From Colombia

QCOLOMBIA - If you send a bouquet of roses for Valentine's Day, chances are they were grown in Colombia. It remains the No. 1...

Colombia begins 2021 with a reactivation of 55% in flights

QCOLOMBIA - The end of the year travel season arrived with important expectations of recovery for the tourism sector. The improvement in the tourist...

Pope thanks Colombia for efforts to protect migrants

Q REDAQTED (Vatican News) - “I always look with gratitude at the efforts of those who work for migrants,” Pope Francis said on Sunday...

Colombia okays US$38 billion dollar reactivation plan

QCOLOMBIA - Colombia’s economic and social policy council (Conpes) has greenlighted a 135 trillion Colombian peso (US$38 billion) economic reactivation plan, which will be...

Colombian Clever Leaves made first shipment of medical cannabis to the U.S.

QCOLOMBIA - Clever Leaves, a Colombian company authorized to handle pharmaceutical grade cannabinoids, announced that its subsidiary, Herbal Brands, managed to establish a strategic...

WANT TO STAY UP TO DATE WITH THE LATEST!

Get our daily newsletter with the latest posts directly in your mailbox. Click on the subscribe and fill out the form. It's that simple!