Ecopetrol Sa · BVC:ECOPETROL

Ecopetrol Sa — Annual Latam Fixed Income Conference - Itau 2017

34 slides from Ecopetrol Sa's conference presentation, Mar 29, 2017

  1. Slide 1: Resilient and Transitioning to Overcome Growth Challenges

    ECOPETROL Resilient and Transitioning to Overcome Growth Challenges March 2017 0

  2. Slide 2: Disclaimer

    DISCLAIMER This document was prepared by Ecopetrol S.A. (the “Company” or “Ecopetrol”) with the purpose of providing the market and interested parties certain financial and other information of the Company. This document may include strategy discussions and forward-looking statements regarding the

  3. Slide 3: Agenda

    AGENDA 1. Navigating the Low Crude Oil Price Environment 2. Delivering on our Targets 3. 2017-2020: Business Plan Update 2

  4. Slide 4: Agenda: Navigating the Low Crude Oil Price Environment

    AGENDA 1. Navigating the Low Crude Oil Price Environment 2. Delivering on our Targets 3. 2017-2020: Business Plan Update 3

  5. Slide 5: Sustained Lifting and Dilution Cost Reduction Enhances Heavy Crude Profitability

    SUSTAINED LIFTING AND DILUTION COST REDUCTION ENHANCES HEAVY CRUDE PROFITABILITY LIFTING COST Key drivers for lifting cost reduction: USD/bl  Optimized subsurface and above ground maintenance 6.5 -12% 2016  Increased self generation with less expensive fuels and lower tariffs 2015 7.4  Optimizati

  6. Slide 6: Optimization Achievements

    OPTIMIZATION ACHIEVEMENTS DAYS OF DRILLING IN MAIN FIELDS TRANSPORTATION COST 2014 2015 USD/bl 40 36 2016 RECORD 34 12 16 26 26 3.3 2016 -3% 20 21 20 5 8 2015 3.4 6 0 Castilla Chichimene Rubiales Drilling-days reduction: Transportation cost reduction:  Cutting-edge drilling technology  Improved ma

  7. Slide 7: Cost Efficiencies: Opportunities Realized Since 2015

    COST EFFICIENCIES: OPPORTUNITIES REALIZED SINCE 2015 2015-2016 SAVINGS COP tn 4.3 0.3 0.2 0.4 2.2 0.4 2.1 0.2 0.7 2.1 2.1 2015 Dilution Contract Mgt. Midstream Upstream transp. Drilling,Energy,Crude Other 2016 Purchases, subsoil maintenance Accumulated Savings of COP4.3Tn /2.4Tn target 6

  8. Slide 8: Capital Discipline + Significant Capex Cuts

    CAPITAL DISCIPLINE + SIGNIFICANT CAPEX CUTS CAPEX 2013-2016 USD bn 9.2 8.7 (25%) (66%) Δ 2014 - 2016 % 6.7 Production (76%) Exploration (80%) Downstream (49%) 3.0 Midstream (56%) 4.3 Corporate (77%) 1.0 2013 2014 2015 2016 Production Exploration Downstream Midstream Corporate Other * 7 * Other : con

  9. Slide 9: Agenda: Delivering on our Targets

    AGENDA 1. Navigating the Low Crude Oil Price Environment 2. Delivering on our Targets 3. 2017-2020: Business Plan Update

  10. Slide 10: A Challenging Environment Led Us to a Profound Transformation

    A CHALLENGING ENVIRONMENT LED US TO A PROFOUND TRANSFORMATION 2014 12/bl 2015 10/bl 2016 9/bl 120 ECP Basket 110 ECP Differential 100 - 54% BRENT (USD/bl) 90 80 70 60 99 87 50 40 54 44 30 45 36 20 jul.-14 jul.-15 jul.-16 ene.- ene.- ene.- oct.-14 oct.-15 oct.-16 abr.- abr.- abr.- 14 15 16 14 15 16

  11. Slide 11: Despite a Challenging Scenario We Exceeded Targets and Built a Robust Liquidity Position

    DESPITE A CHALLENGING SCENARIO WE EXCEEDED TARGETS AND BUILT A ROBUST LIQUIDITY POSITION FINANCIAL OPERATIONAL EBITDA PRODUCTION MARGIN 38% OVERPERFORMANCE 718 mbod UPSTREAM 10.5 EBITDA/bl (USD) WARRIOR CRUDE OIL DISCOVERY SAVINGS GOAL EXCEEDED (COP) 2.2 Tn REFICAR POSITIVE SOLID CASH MARGIN AND LOA

  12. Slide 12: Mitigated Price Impact on Reserves Through Cost Optimizations

    MITIGATED PRICE IMPACT ON RESERVES THROUGH COST OPTIMIZATIONS RRR Excluding Price Effect: 79% RRR All In: -7% 2,000 1,849 -235 1,800 -202 186 2 1,598 1,600 mboe 1,400 1,200 1,000 800 600 Balance Dec 15 Prod. 2016 Price Cost Opt. Balance Dec 16 Costs Optimization Lower transportation cost 20% drop in

  13. Slide 13: Exploratory Activity

    EXPLORATORY ACTIVITY 2016 A3 GORGON A1 PURPLE ANGEL A3 BULLERENGUE A3 WARRIOR 2016 SUR-1 ECOPETROL AMÉRICA 4Q: CANTAGALLO LLANITO-GALAN Warrior, Finished drilling : Successful - Operated by Anadarko , % ARAUCA BORANDA A3 PLAYON CUSIANA-CUPIAGUA- RECETOR CASTILLA CHICHIMENE- PAYERO PROJECT EVALUTION

  14. Slide 14: Midstream Integration to Achieve a More Efficient Operation

    MIDSTREAM INTEGRATION TO ACHIEVE A MORE EFFICIENT OPERATION TRANSPORTED VOLUMES mboed  Fee renegotiation and improved -8.3% procurement process 1,232 1,229 Products 1,092 1,130 254 265 263 264 Crude 978 964 828 867  Segment consolidation and alignment among all midstream companies 2015 4Q 2015 4Q

  15. Slide 15: Reficar Advances in Successful Completion of Stabilization Period

    REFICAR ADVANCES IN SUCCESFULL COMPLETION OF STABILIZATION PERIOD REFINERY RUNS AT CARTAGENA MID DISTILLATES AND GASOLINE GROSS REFINING MARGIN AT YIELD AT CARTAGENA (%) CARTAGENA mbod Mid distillates USD/bl Gasoline +17% +200% 128 45% 8.4 36% 32% 28% 109 2.8 Start-up Stabilization Start-up Stabiliz

  16. Slide 16: Enhanced Operational Methods Mitigated External Impacts on Downstream

    ENHANCED OPERATIONAL METHODS MITIGATED EXTERNAL IMPACTS ON DOWNSTREAM REFINERY RUNS AT B/MEJA MID DISTILLATES YIELD AT GROSS REFINING MARGIN (MBD) B/MEJA (%) B/MEJA (USD/bl) -4% 36% -17% 33% 32% 31% 31% 29% 16.8 222 229 213 209 15.0 14.8 14.0 2015 4Q 2015 4Q 2016 2016 2015 1Q 2Q 3Q 4Q 2016 2015 4Q 4

  17. Slide 17: We Delivered Amidst the Challenges: Solid Financial Metrics

    WE DELIVERED AMIDST THE CHALLENGES: SOLID FINANCIAL METRICS REVENUES EBITDA LEVERAGE COP tn COP tn Margin Times (x) -8% 18 18 52 2.9 3.0 48 2.6 2.2 +3% 2015 2016 2015 2016 ND/Ebitda GD/Ebitda 35% 38% 2015 2016 Ecopetrol is among few Oil & Gas companies that reported positive results 16

  18. Slide 18: Structural Savings, Improved Commercial Strategy and Lower Impairments Benefited the Net Result

    STRUCTURAL SAVINGS, IMPROVED COMMERCIAL STRATEGY AND LOWER IMPAIRMENTS BENEFITED THE NET RESULT COP tn 2.8 (0.1) (4.0) 4.6 7.4 0.06 (4.4) 2.6 1.0 1.0 (0.8) 1.6 -4.0 Net NetIncome icome Sales Fixed cost Variable cost Expenses Depr./amort. Impairm. FX Financial Income tax Non-cont. Net icome Net Incom

  19. Slide 19: Strong EBITDA Across Segments in Spite of Lower Production and Prices

    STRONG EBITDA ACROSS SEGMENTS IN SPITE OF LOWER PRODUCTION AND PRICES COP tn 8 18 2 8 Group´s Ebitda Upstream Downstream Midstream Margin 37.7% 30.5% 7.4% 73.1%

  20. Slide 20: Strong Cash Balance as a Catalyst for Additional Growth Opportunities

    STRONG CASH BALANCE AS A CATALYST FOR ADDITIONAL GROWTH OPPORTUNITIES COP tn 1.66 (3.41) 17.16 (5.84) (4.72) (2.76) 14 (0.23) 8.4 6.55 5.3 Initial cash Cash from Recovery of Net tax Capex Investment Debt outflows FX Ending cash Other financial balance operations funds and portfolio 1 & other2 balanc

  21. Slide 21: 2016 Cost-Efficient Financing Strategy

    2016 COST-EFFICIENT FINANCING STRATEGY Outstanding Consolidated Debt 2016 Financing Transactions USD mm USD mm Company Total (%) 1,270 Ecopetrol 13.017 75,5% Reficar 2.796 16,2% Bicentario 516 3,0% 500 ODL 257 1,5% Reopening 2023 Intl Bond Bioenergy 158 0,9% Ocensa 500 2,9% Total 17.244 100% Bilater

  22. Slide 22: Keeping Debt Stock Will Be the Focus

    KEEPING DEBT STOCK WILL BE THE FOCUS Consolidated Amortization Profile USD mm Ecopetrol Bicentenario Bioenergy Ocensa ODL Reficar 3,000 Amortizations ~ 41% Available Redemptions 2,500 291 341 41 66 12 2,000 76 278 50 12 160 64 267 1,500 10 270 23 10 2,236 1,000 9 1,949 2,000 252 1,662 1,500 50 1,234

  23. Slide 23: 2017 Perspectives

    2017 Perspectives • 17 exploratory wells drilled: 6 offshore Colombia and 11 onshore Colombia • Production Target: 715 Mboed • Robust liquidity opens up opportunities for inorganic growth • Gross Debt/Ebitda: 2.5-3x • New target savings of USD 0.24 Bn 1 in 2017 • Stabilization of Reficar and integra

  24. Slide 24: Agenda: 2017-2020 Business Plan Update

    AGENDA 1. Navigating the Low Crude Oil Price Environment 2. Delivering on our Targets 3. 2017-2020: Business Plan Update

  25. Slide 25: Ecopetrol's 2020 Corporate Strategy Pillars

    Ecopetrol’s 2020 Corporate Strategy Pillars Cash flow focus & cost efficiency Transformation Program Strict Reserves & Capital Production Discipline growth

  26. Slide 26: Business Plan Secures Profitability and Sustainability at 50 USD/bl

    BUSINESS PLAN SECURES PROFITABILITY AND SUSTAINABILITY AT 50 USD/BL PLANNING THE STRATEGY AT 50 USD/Bl Brent (USD/bl) 90 Previous Plan 80 80 70 70 70 70 An increase in 60 prices is not contemplated 50 50 50 50 in the financial 50 44 plan 40 30 2016 2017 2018 2019 2020 Business plan @70 Business plan

  27. Slide 27: Flexible Investment Plan Focused on Upstream

    FLEXIBLE INVESTMENT PLAN FOCUSED ON UPSTREAM INVESTMENT LEVEL OPTIMIZATION FOCUS ON UPSTREAM vs. MID & DOWN Ecopetrol Total Capex, 2017-20 (USD bn) Capex distribution by segment (%) 30 31% 85% 100 24 10 (6,0/year) 80 41 15 17 20 (4,3/year) 60 13 12 (3,3/year) 40 75 10 20 47 0 0 @ 50 USD/bl @ 70 Prev

  28. Slide 28: Profitable Production Growth

    PROFITABLE PRODUCTION GROWTH GROWTH BETWEEN 6% AND 22% PROFITABLE BARRELS Production (mboed) EBITDA/barrel at 760 mboed (USD/bl) 21% 185% 1,000 16% +6% 870 30 138% 30 830 760 750 718 25 20 14% 500 Business plan 12 May/2015 10,5 250 10 0 0 2016 2020 @ 2020 @ 2020 @ 80 50 USD/bl 70 USD/bl USD/bl 2016

  29. Slide 29: Current Assets Are Base for 2020 Production Target

    CURRENT ASSETS ARE BASE FOR 2020 PRODUCTION TARGET Production breakdown 2020 and comparison at 2016 mboed 1,000 +6% +9% 760 830 800 49 49 715 18 26 39 69 314 600 346 400 94% on 340 current assets 200 45% 340 0 2016 Base Infill Secondary Tertiary Exploration 2020 @ 50 Upturn 2020 @ 70 Plan Drilling R

  30. Slide 30: Financial Flexibility Will Allow Further Development in the Americas

    FINANCIAL FLEXIBILITY WILL ALLOW FURTHER DEVELOPMENT IN THE AMERICAS Offshore GOM-US Offshore Colombia Onshore Mature Fields Colombia (Mid-term) Latam Off-shore • Mexico (Mid-longterm) • Ecuador • Brazil • Argentina • Venezuela

  31. Slide 31: Profitable Growth in Mid and Downstream

    PROFITABLE GROWTH IN MID AND DOWNSTREAM OPERATIONAL EXCELLENCE REPRESENTS USD 0.7 BN OF IMPACT IN EBITDA BY 2020 720 Transportation: Investment 240 rationalization and profit maintenance 110 70 Downstream: Profit and cashflow 180 maximization 55 300 50 75 2017 2020 Commercialization: Increase of bar

  32. Slide 32: Group's Viability at 50 USD/bl and Upside with Higher Prices

    GROUP´S VIABILITY AT 50 USD/BL AND UPSIDE WITH HIGHER PRICES SOURCES AND USES OF CASH, 2017-2020 USD bn 25 21.3 16.5 20 15 10 4.0 4.8 5 0 Sources: Uses: Available cash @ 50 Additional cash @ 70 Operating Cash flow CAPEX and Interest USD/bl USD/bl And Divestments payments

  33. Slide 33: Reduce Debt/EBITDA and Preserve Investment Grade Rating

    REDUCE DEBT/EBITDA AND PRESERVE INVESTMENT GRADE RATING MAINTAIN STRICT CAPITAL REDUCE FINANCIAL LEVERAGE DISCIPLINE 4 Focus on profitable projects 2.9 3,0 3 Divestment of non-strategic assets 2 40% Payout 2.5 1 Reduce leverage 0 2016 Target 2020

  34. Slide 34: Para uso restringido en Ecopetrol S.A.

    Para uso restringido en Ecopetrol S.A. Todos los derechos reservados. Ninguna parte de esta presentación puede ser reproducida o utilizada en ninguna forma o por ningún medio sin permiso explícito de Ecopetrol S.A.

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