Ecopetrol Sa · BVC:ECOPETROL
Ecopetrol Sa — Non-Deal Roadshow (December 2008)
41 slides from Ecopetrol Sa's roadshow presentation, December 2008
Slide 1: Colombian National Oil Company: Energy for the Future
Colombian National Oil Company “Energy for the Future” Ecopetrol S.A. December 2008
Slide 2: Disclaimer
Disclaimer This document was prepared by Ecopetrol S.A. 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 probable development of Ecopetrol
Slide 3: Non-deal roadshow management team
Non-deal roadshow management team Presenter Summary Bio Javier G. Gutiérrez (57) Mr. Gutiérrez has served as our President and CEO since January 22, 2007. Prior to becoming our CEO, Mr. Gutiérrez served as CEO of Empresa de Interconexión Eléctrica S.A. E.S.P. or ISA Chief Executive Officer since 199
Slide 4: Agenda
Agenda Company overview Colombia oil & gas sector framework Investment highlights Financial performance Closing remarks 3
Slide 5: Vertically integrated O&G company transforming into a global energy player
Ecopetrol is a vertically integrated O&G company with a unique track record in the industry and is currently transforming itself into a global energy player Historical events 1905: De mares and Barco concession 1951: Ecopetrol’s incorporation 1960: First crude oil discovered in Colombia by Eco
Slide 6: Present in most subsectors of the O&G chain with leading market share
EC is present in most of the subsectors of the O&G chain in Colombia and has a leading market share Portfolio highlights Direct Market Share P1: 1,499 MMBOE Total: 74% Exploration Reserves (gross) Oil: 70.1% as of Dec. 2007 Gas: 29.9% Production (gross) Total: 444 MBOED Oil: 59% Oil: 358 MBOED Gas:
Slide 7: Largest company in Colombia with strong financial metrics
EC is the largest company in Colombia with strong financial metrics Key financial highlights (In US$ bn) September 30, 2008 September 30, 2007 12,2 Revenues 7,6 6,3 EBITDA 4,0 4,4 Net Income 1,9 Source: Ecopetrol. Colombian GAAP Ownership structure – October 2008 Colombian Colombian Local Pension Lo
Slide 8: Ecopetrol's core strengths
Ecopetrol’s core strengths Favorable economic environment and strong industry framework in Colombia 1 Outstanding financial performance and Quality of asset 7 2 resources to support base and reserves growth World-class Experienced operations with 6 3 strong operating management team efficiency High
Slide 9: Agenda
Agenda Company overview Colombia oil & gas sector framework Investment highlights Financial performance Closing remarks 8
Slide 10: Favorable economic environment and strong industry framework
The Colombian economy has experienced strong growth, Favorable economic environment and strong industry framework reflecting investor confidence and increasing foreign investment Real GDP (% change) and credit rating Credit rating BBB- Investment grade BBB- 7,5% 6,8% BB+ BB+ BB+ 4,9% 4,7% 3,4% 3,9%
Slide 11: Transparent and stable regulatory and institutional framework
Colombia has a very transparent and stable regulatory and institutional framework for the oil and gas sector Institutional Structure Regulatory and legal framework Favorable and stable contractual system • All companies compete under the same terms and conditions (Policies) Modern and profitable E&P
Slide 12: Strong E&P metrics attracting international players
Strong E&P metrics continue attracting key international Favorable economic environment and strong industry framework players; Ecopetrol is the preferred partner International players in Colombia Colombia’s total exploration activity Producer Dry Testing Seismic Kilometers 72 80 70 30 70 25 56 14 60
Slide 13: Colombia has entered a new exploratory cycle
Since 2003, Colombia has entered into a new Favorable economic environment and strong industry framework exploratory cycle 30.000 80 High Impact Discoveries A NEW EXPLORATORY CYCLE 70 CAÑO LIMON 25.000 SAN FRANCISCO 60 Equivalent seismic kilometers APIAY No. of exploratory wells 20.000 CUSIANA 50 CU
Slide 14: Agenda
Agenda Company overview Colombia oil & gas sector framework Investment highlights Financial performance Closing remarks 13
Slide 15: US$60 billion investment 2008-2015
EC will invest US$ 60 Billion from 2008-2015 to achieve its goals 25 0,6 20 1,2 3 Internal 15 4 Organization 10 USD $2 billion 5 11,2 0 Downstream Downstream USD $20 billion Energy&Biofuels Transport New Business (Retail) Petrochemical Refineries Exploration & Production 40 10 USD $38 billion 30 20
Slide 16: Diversifying portfolio with new opportunities abroad
Upstream EC is diversifying its portfolio with new opportunities abroad Local Exploration Projects International Exploration Projects Offshore Caribbean Round Tayrona GULF OF Caribbean Round MEXICO Fuerte K2 7 Blocks Venezuela Foothills BRASIL Gibraltar PERU 7 Blocks Zeus 3 Blocks Cóndor 6 TEA Tierr
Slide 17: Exploratory activity has increased over five years
Exploratory activity has increased over the past five years… Ecopetrol’s exploratory activity (No. of wells and Km of seismic) Ecopetrol Direct Ecopetrol Joint Venture Ecopetrol and partners seismic (Equivalent km) Quality of asset base and reserves 6.767 12 9 4.584 8 8 3 3.470 3.081 2.668 3 4 2.084
Slide 18: Efforts to maintain a strong reserve base
…with significant efforts to maintain a strong reserve base Crude oil and natural gas gross reserves1 (MMBOE) 115 21 142 41 148 Quality of asset base and reserves 48 1.565 1.558 1.499 Dec. 2005 Revisions Extensions Production Dec. 2006 Revisions Extensions Production Dec. 2007 and and Discoveries Di
Slide 19: Production profile continues positive trend
Ecopetrol’s production profile continues to show a positive trend Development wells – Number of wells Wells in joint venture Wells owned and operated by Ecopetrol 433 Quality of asset base and reserves 403 283 321 205 210 125 148 152 145 109 126 120 112 16 22 53 65 2003 2004 2005 2006 2007 Up to Sep
Slide 20: Natural gas business presents attractive opportunities
Ecopetrol’s natural gas business presents attractive opportunities due to market dynamics Natural Gas gross production (MMCFD) Quality of asset base and reserves 487 421 394 412 343 356 2003 2004 2005 2006 2007 Up to Sep.08 Source: Ecopetrol Local sales of Natural Gas (MMCFD) Selected natural gas pr
Slide 21: Improving refining performance
Ecopetrol continues improving its refining performance while meeting the local demand of oil products Utilization Barrancabermeja Cartagena Quality of asset base and reserves Utilization 300 305 296 312 310 (%) 305 77(96%) 78(98%) 72(91%) 80(100%) 80(100%) 80(100%) 223 227 224 232 230 225 (89%) (91%
Slide 22: Operational costs below industry average
Ecopetrol has been able to manage operational costs below the industry average World-class operations with strong operating efficiency Finding and development costs (US$/Bl) Lifting costs (US$/Bl) Finding Development 13,4 7,2 6,93 11,9 10,1 5,2 6,4 3,3 4,3 3,4 2005 2006 2007 2005 2006 2007 Up to Sep
Slide 23: Improving environmental, safety and security indicators
Ecopetrol is improving its environmental, safety and security indicators World-class operations with strong operating efficiency Environmental incidents Accidents Frecuency of combined accidents (per mm of worked hour) 112 88 5,8 59 43 2,6 1,8 1,9 2005 2006 2007 Up tp Sep.08 2005 2006 2007 Up to Sep
Slide 24: Solid foundation supports growth strategy
A solid foundation supports our strategy to Growth prospects and strong platform to pursue opportunities capture growth opportunities Strategy map Upstream Downstream Mainly focused on the upstream Selectively capture business downstream opportunities Organic and acquisition Clean fuels and
Slide 25: Growth strategy focused on upstream business
Upstream Ecopetrol’s growth strategy is mainly Growth prospects and strong platform to pursue opportunities focused on the upstream business… Organic and acquisition growth Upstream CAPEX (USD in million) • Further development of existing asset base • Enhance recovery factor in brown fields (La Cira
Slide 26: Investments targeting new reserves through E&P
Upstream Growth prospects and strong platform to pursue opportunities Investments are targeting new reserves through E&P operation Reserves Addition 2008-2012 per year 436 MMBOE International MMBOE 80 23% 100 National 77% 256 1 Exploration Development of fields M&A Source: Ecopetrol 25 25
Slide 27: Selectively capturing downstream opportunities
Ecopetrol’s growth strategy allows selectively Downstream Growth prospects and strong platform to pursue opportunities capture downstream opportunities, synergies and higher margins Downstream investments Significant CAPEX in new projects • Achieve balanced integration • Barrancabermeja refinery : h
Slide 28: First class partners are part of our strategy
Upstream Downstream First class partners are part of our Growth prospects and strong platform to pursue opportunities strategy Some of our Partners: Upstream Downstream BP GLENCORE BHPBILLITON OCENSA CEPSA OLEODUCTO DE CHEVRON COLOMBIA EXXONMOBIL HESS GROUP HOCOL- MAUREL ET PROM LUKOIL MANSAROVAR NE
Slide 29: Recent transactions prove capacity to acquire assets and win concessions
Recent transactions prove Ecopetrol’s Growth prospects and strong platform to pursue opportunities Upstream Downstream capacity to acquire assets and win concessions in a competitive environment Selected strategic transactions Gulf of Mexico E&P asset: Caribbean oil bid round in Polypropilene acquis
Slide 30: High standards of corporate governance
Ecopetrol has high-standards of corporate governance practices driven by an independent Board of Directors Corporate Governance Code Unilateral Statement of the principal High standards of corporate governance shareholder (The Nation – 89.9%) In compliance with IFC, OCDE and local Clear dividend
Slide 31: Experienced senior management team
Experienced senior management team leading more than 6,000 employees with an average of 13 years of service Experienced management team Javier G. Gutierrez P. Core business unit President-CEO 2 years Corporate Adriana Echeverri Chief Financial Officer 14 years Mauricio Echeverri Alvaro Vargas Genera
Slide 32: Creating a world class workforce
Creating a world class workforce to support our business strategy Strong corporate culture and developing Importance of research and development competencies for employees Experienced management team In 2006 Ecopetrol established the Leadership The Colombian Petroleum Institute (“ICP”) supports
Slide 33: Agenda
Agenda Company overview Colombia oil & gas sector framework Investment highlights Financial performance Closing remarks 32
Slide 34: Consistent revenue growth
Outstanding financial performance and resources to support growth Consistent revenue growth… Revenues by segment (USD in millions) Transportation and other Refining Production 11.085 79.3% 9.127 8.640 7.700 5.721 6.478 6787 61% 4.820 4.506 52% 4.066 3.273 3884 35% 3.905 45% 1.337 1.350 2003 2004 200
Slide 35: Improving operating margins and cash generation
Outstanding financial performance and resources to support growth …with improving operating margins and cash generation Costs and expenses (USD in millions) Operating Expenses Variable costs* Fixed costs 6.436 6.722 5.647 594 4.799 666 4.333 4.498 3.994 485 3.318 4.623 2.447 2.452 1.566 1.506 2003 2
Slide 36: Higher profitability with attractive dividend policy
Outstanding financial performance and resources to support growth … and higher levels of profitability, with an attractive dividend policy Net income (USD in millions) 4.404 2.571 1.615 1.684 1.881 789 1.048 2003 2004 2005 2006 2007 Up to sep.07 Up to sep.08 Source: Ecopetrol Dividends declared per
Slide 37: Capacity to fund growth through capital structure optimization
Outstanding financial performance and resources to support growth Capacity to fund growth through optimization of the capital structure Balance sheet (USD bn) Assets Equity Liabilities Source: Ecopetrol 15,0 13,3 10,3 10,3 27,8 6,6 23,9 5,0 21,2 20,9 4,6 16,2 13,9 13,0 12,8 10,9 10,6 10,6 8,9 9,6 8,
Slide 38: Agenda
Agenda Company overview Colombia oil & gas sector framework Investment highlights Financial performance Closing remarks 37
Slide 39: Closing remarks
Closing remarks “We are a growing vertically integrated Oil & Gas company with…” Excellent operating and financial track record demonstrated by (i) attractive level of production growth and reserve replacement, (ii) improved margins, and (iii) substantial improvement of HSE (Health, Safety and Env
Slide 40: Closing remarks (cont'd)
Closing remarks (cont’d) “We are a growing vertically integrated Oil & Gas company with…” Experienced management team with proven track record supported by a committed and skilled workforce Available internal and external financial sources to fund growth Internal cash generation (EBITDA of US$
Slide 41: Presentation available at www.ecopetrol.com.co
Presentation will be available at www.ecopetrol.com.co 40