Ecopetrol Sa · BVC:ECOPETROL
Ecopetrol Sa — Colombia Inside Out 2019
36 slides from Ecopetrol Sa's conference presentation, June 2019
Slide 1: Colombia Inside Out 2019
COLOMBIA INSIDE OUT 2019 London, June 2019
Slide 2: Legal Disclosure
LEGAL DISCLOSURE 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
Slide 3: Best Financial Results of the Last Five Years
BEST FINANCIAL RESULTS OF THE LAST FIVE YEARS 755 761 718 715 716 728 120 X=99 X=54 X=45 X=55 X=72 X=64 USD/Bl 45.4% 46.1% 100 EBITDA 41.8% Margin 37.1% 37.7% 34.7% 80 66.0 67.8 55.2 52.1 60 47.7 40 30.8 24.5 23.1 18.1 18.0 20 15.9 11.6 5.7 6.6 7.4 1.6 2.7 0 -3.9 2014 2015 2016 2017 2018 Jan-Mar 201
Slide 4: Reserves Balance 2018
RESERVES BALANCE 2018 CONTINUING ALONG THE GROWTH PATH Technical and Commercial Management Proven Added 260 MBOE Reserves 47 307 MBOE 1,659 239 57 74 1,727 129 The highest Reserve Replacement Ratio of the last 4 years 307 MBOE 129% Increase in the Average Reserve Life 7.2 years Balance 2017 Producti
Slide 5: Solid Operating 1Q19 Results
SOLID OPERATING 1Q19 RESULTS LEVERAGE OUR GOALS Production Midstream mboed Drilling campaigns 728 Crude volume transported 1Q2019 vs 1Q2018 10.6% Recovery Program 49% Lower number of attacks on oil pipeline infrastructure Commission of Experts submitted recommendations 1Q2019 vs 1Q2018 about unconve
Slide 6: Strategy 2020+
STRATEGY 2020+ VALUE CREATION AS AN INTEGRATED BUSINESS GROUP Existing fields Reserves and Production Growth Exploration Unconventional in Colombia Competitiveness and Sustainability Strict Capital Cash Protection Discipline and Cost Efficiency International 6
Slide 7: Upstream
Upstream
Slide 8: 2019 Exploration Plan
2019 EXPLORATION PLAN GUA OFF-1 SHORT AND MEDIUM TERM RESERVES ADDITION Seismic surveys: MILESTONES JAN-MAY 2019 2D 2,660km2 3D 167,262km2 Near-field Exploration COL-5 Boranda-2 +92,000 Km Jaspe-8 well (Success) near Quifa field Cira 7000 ST-1 Andina vs. 2018 Norte-1 Andina Norte-1 well (Success) ne
Slide 9: Maturing Potential in Colombia 2019-2023
MATURING POTENTIAL IN COLOMBIA 2019-2023 Jaspe Arrecife Andina Cosecha Lorito ONSHORE Appraisal plan to Oil discovery determine commerciality Near-field Exploration Gas discovery (Under evaluation for (Under evaluation (Under evaluation for commerciality) (1 well 2019 and 2 Fast-track incorporation
Slide 10: Internationalization in High Prospective Basins
INTERNATIONALIZATION IN HIGH PROSPECTIVE BASINS US Unconventionals • Projects under evaluation Options • Drivers: know how / short cycle access GoM - USA Mexico Brazil • K2, Gunflint and • Blocks 6 and 8 awarded position Current position Current position Current • Pre-salt blocks (Pau Brasil & Satur
Slide 11: Ecopetrol Óleo e Gas do Brasil: Strategic Access to Brazilian Pre-Salt
ECOPETROL ÓLEO E GAS DO BRASIL STRATEGIC ACCESS TO BRAZILIAN PRE-SALT BRAZIL – 2019-2021 Equatorial Margin: Technical evaluation of CEARÁ FOZ DO prospects and compliance of the AMAZONAS 200 km exploration commitments. 50% 100% Foz de Amazonas: ECP 70% - JX Nippon* 30% POT- POTIGUAR More diversifie
Slide 12: Production in Line with the Target
PRODUCTION IN LINE WITH THE TARGET Key Fields Production (mboed) +3.9% +5% +6% +9% mboed 720- 114 121 109 116 720 728 64 70 701 730 LONDON Rubiales Castilla Chichimene 1Q 2018 1Q 2019 1Q 2018 2018 1Q 2019 2019E New field Gas field Recovery Gas production increased 6.8% in 1Q 2019 versus 1Q pilot f
Slide 13: Recovery Program: Significant Potential to Add Production and Reserves
RECOVERY PROGRAM SIGNIFICANT POTENTIAL TO ADD PRODUCTION AND RESERVES Cumulative ECP could also take its expected proven reserve Gross potential volume recovery recovery factor to 24%* in 2021 factor 55.3 10.60 11.52 BBOE BBOE 19% 2.01 21% 2.01 23% 39.8 55.3 24% HCIIP** Cumulative production 10.6 19
Slide 14: Recovery Program: Significant Potential to Add Reserves
RECOVERY PROGRAM SIGNIFICANT POTENTIAL TO ADD RESERVES Potential Volume by 58 opportunities Technology Primary (PRIM) 12 Water Flooding (WF) 20 PRIM GAS Enhanced Oil Recovery(CEOR) 16 6% Gas Injection (GAS) 1 2% ICV Steam continuous Injection (ICV) CIS 7 13% 30% Combustion in-situ (CIS) 2 ~ 6,500 we
Slide 15: Hydrocarbons Initially in Place (HCIIP)
HYDROCARBONS INITIALLY IN PLACE (HCIIP) SYSTEMATIC REVIEW OF POTENTIAL Development in Lorito from the Development in the north of Suria based on understanding of Chichimene and Akacías results from Saurio 2 well The Lorito area will allow us increase the HCIIP between 1.5 and Saurio-2 well had o
Slide 16: Primary, Secondary and Tertiary Recovery of Extra-Heavy Crude (Chichimene)
PRIMARY, SECONDARY AND TERTIARY RECOVERY OF EXTRA-HEAVY CRUDE (CHICHIMENE FIELD) Current Target Recovery 6% 27% Historical Projection ~ 80 mboed Factor 90 of production 80 by 2021 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026+ 70 30K Plan 60 Primary Integral module MBOED recovery 50 40 WF pilot
Slide 17: Recovery Program: Increased Number of Projects Meeting Portfolio Hurdle
RECOVERY PROGRAM INCREASED NUMBER OF RECOVERY PROJECTS MEETING THE PORTFOLIO HURDLE Lowering break even of recovery project Increasing efficiency of water injection Barrels injected / barrels produced 2016 2017 2018 Break even (USD/bl) TECHNOLOGY PRIMARY WF CEOR CSI ISC WAG 2015 2016 2017 2018 2014
Slide 18: Unconventional Potential
Gas potential ~4 to 24 TCF UNCONVENTIONAL POTENTIAL Cesar - Ranchería CBM and Shale Gas potential (~10 TCFs Gas) Middle Magdalena Valley Catatumbo Shale Oil/Gas potential (4-7 BBO) Shale Oil potential (~ 4 - 13 TCFs Gas) (~ 0.2 - 1.4 TCFs Gas) Crude Middle Magdalena NGLs Valley Dry gas ~4 to 13 TCF
Slide 19: Unconventional Development
UNCONVENTIONAL DEVELOPMENT EXPECTED TIMELINE SUBJECT TO GOVERNMENTAL DECISIONS 2019 2020 2021 2022 ONWARDS TIMELINE* PHASE 2 PHASE 1 PHASE 3 Commission CAPEX of Experts 2019 - 2021 CE Protocol of the Social-Environmental (CE)* Report MME on CE baseline Up to US$0.5 B State DEVELOPMENT Council* Relea
Slide 20: Downstream
mk bert iat Down stream
Slide 21: Downstream: Capturing Value from Current Assets
23% DOWNSTREAM CAPTURING VALUE FROM CURRENT ASSETS Throughput (MBD) Throughput composition - Cartagena 215 222 215 221 223 229 203 201 196 147 145 153 158 150 155 39% 42% 49% 123 136 136 66% 71% 79% 80% 77% 87% 61% 58% 51% 34% 29% 21% 20% 23% 13% 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19
Slide 22: Strategy to Face MARPOL 2020
STRATEGY TO FACE MARPOL 2020 OPPORTUNITIES AND CHALLENGES Upstream Downstream Seek market 1 opportunities for high- value products (diesel Refineries Feedstock: Production Portfolio: IPCC* 40% and light crudes). Greater production of light Interconnection in Greater throughput of light crudes Refica
Slide 23: Midstream
Midstream Transporte Picture: ODL
Slide 24: Midstream: Higher Efficiency and Optimization of Transportation Systems
MIDSTREAM HIGHER EFFICIENCY AND OPTIMIZATION OF TRANSPORTATION SYSTEMS Maintain profitability Priorities CAPEX for growth (support refined products demand) Transported Volume Revenue 2019 - 2021 Transported volumes: 1,100 – 1,250 mbd EBITDA Margin: 75%-80% +12% MBOD +7% COP Tn 272 260 3.05 2
Slide 25: Financial Results
Financial Results Resultados Excepcionales
Slide 26: Financial Results
FINANCIAL RESULTS FOCUSED ON PROFITABLE GROWTH 26 *Ebitda calculated for the last twelve months **Normalized TRM; ***ROACE = Operating income after taxes / Capital employed (Figure in pesos)
Slide 27: 2019 Investment Progress
2019 INVESTMENT PROGRESS IMPROVED EXECUTION LEVEL AND MAINTAINING CAPITAL DISCIPLINE CHANGE IN INVESTMENT TREND SUPPORTED ON HIGHER ACTIVITY 2019 Target # RIGS DEVELOPMENT MUSD $3.5 - $4.0 WELLS 700 USD Bn +35% 38 579 500 2019 28 Target # Wells 647 6 33 151 262 85 +59% 29 2016 2017 2018 Jan-May 2019
Slide 28: Efficiencies: Leveraging Sustainable Growth
EFFICIENCIES LEVERAGING SUSTAINABLE GROWTH LIFTING COST DILUTION COST (USD/Bl) 20.0% (USD/Bl) Benchmark* 9.7 Dilution 6.7 14.8% 14.8% 14.6% 14.8% 1Q 19 8.72 14.2% Factor 4Q 18 9.22 5.3 4.9 4.6 3Q 18 8.74 3.7 2Q 18 8.47 3.9 1Q 18 8.09 2014 11.2 2014 1Q 18 2Q 18 3Q 18 4Q 18 1Q 19 FINDING & DEVELOPMENT
Slide 29: New Savings Target of US$2.6 Billion Between 2019-2023
THE GROUP HAS SET A NEW SAVINGS TARGET OF US$ 2.6 BETWEEN 2019 -2023 Cumulative Efficiencies of the Group Continuing with the Transformation 2015-2023 BUSD Structural savings focused on improving revenues, costs and investments 5.9 Ensure the operation prioritizing care for our workers, the 1.9 envi
Slide 30: Continuing with the Transformation: Strategic Priorities
CONTINUING WITH THE TRANSFORMATION STRATEGIC PRIORITIES Exploration Corporate & Digital Agenda • Regional competitive practices • Projects procurement • Greater synergies between • Digital Transformation- First Group’s subsidiaries Phase (10 projects) Enhancing our Midstream • Operative Model 5% cap
Slide 31: Digital and Technological Transformation Could Generate Up to US$1.0 B EBITDA
DIGITAL AND TECHNOLOGICAL TRANSFORMATION COULD GENERATE UP TO US$1.0 B EBITDA PER YEAR … with investments of ~US$120 M … with potential generation of More than 40 initiatives… in the first wave EBITDA up to US$1.0 B per year Upstream Upstream ~0.65 – 0.75 Midstream Midstream ~0.15 – 0.2 Downstream D
Slide 32: ESG Ensures the Group's Sustainability
ESG* ENSURES THE GROUP´S SUSTAINABILITY Stakeholders ENVIRONMENTAL MANAGEMENT SOCIAL-ENVIRONMENTAL INVESTMENT Education, Integral water management ~US$ 0.7 B(1) health and sports Environmental Investment management Rural inclusive Biodiversity development Climate change Entrepreneurship Social- Envi
Slide 33: Energy Transition
ENERGY TRANSITION FOCUSED ON EFFICIENT CONSUMPTION AND INCORPORATION OF RENEWABLE SOURCES INTO THE ENERGY MATRIX ENERGY EFFICIENCY SELF-GENERATION RENEWABLE ENERGIES Energy cost savings Group (1) Additional self-generation capacity Incorporation of renewable energies US$ M MW MW 2019-2021 PLAN -17%
Slide 34: Self-Funded Capex Plan Under Strict Capital Discipline Criteria
SELF-FUNDED CAPEX PLAN UNDER STRICT CAPITAL DISCIPLINE CRITERIA 1% Other 2% Corporate CAPEX plan 2019 – 2021 (US$ B) Downstream 7% Sustainability and Value Capture 100% Midstream Organic 12 -15 US$ B Investment Profitable growth Upstream 34
Slide 35: 2019-2021 Targets
2019-2021 TARGETS SUSTAINABILITY, GROWTH AND INTEGRATED PRODUCTION 2021 VALUE CREATION 750 – 770 mboed CAPEX ROACE** US$12 – 15 B Above 11% TRANSPORTED VOLUME 1,100 – 1,250 mbd Cumulative Free Cash Flow Gross debt/EBITDA US$12 B 1.0 – 1.5 X REFINING THROUGHPUT 370 – 400 RRR* (excluding price effect)
Slide 36: Energy for the Future
octterrou ENERGY FOR THE FUTURE Ecopetrol S.A. All rights reserved. The re production of this presentation is forbidden without the written authorization of Ecopetrol S.A.