Slide 1: Colombia Inside Out Presentation
ECOPETROL COLOMBIA INSIDE OUT Presentation May 2016 0
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 Ecopetro
Slide 3: Agenda
Agenda 1. 2016 a year of Transition 2. Preparing for structural changes 3. New possibilities: Doing more with less 4. 2017 and beyond 2
Slide 4: Agenda
Agenda 1. 2016 a year of Transition 2. Preparing for structural changes 3. New possibilities: Doing more with less 4. 2017 and beyond 3
Slide 5: Crude price at 12-year low in first quarter 2016
The price environment continued to defy the oil industry, the value of crude in the first quarter of 2016 reach USD$28/barrel a 12 years record low BRENT PRICE USD$/bl 160 140 120 100 80 60 40 36,6 20 28,8 27,9 0 Oct-07 Oct-12 Sep-05 Jan-04 Nov-04 Apr-05 Jul-06 Jan-09 Nov-09 Apr-10 Jul-11 Jan-14 Nov
Slide 6: 2016 is a transition year; measures to manage price conditions
2016 is a transition year. Ecopetrol is taking all measures required to manage the current price conditions • Focus on capital discipline and cash flow protection Capital Discipline • 2016 CAPEX reduction Efficiency Focus • Additional savings target of USD $0,5 Bn • Value over volume: Production tar
Slide 7: Agenda
Agenda 1. 2016 a year of Transition 2. Preparing for structural changes 3. New possibilities: Doing more with less 4. 2017 and beyond 6
Slide 8: Capital Discipline: Adjustment in Capex since 2015
Capital Discipline: Adjustment in Capex implemented since 2015 with significant cuts in all segments CAPEX 2011 - 2016 Change 2014-2016 USD$ Billions % -25% -66% Production -76% 9,4 9,2 8,8 0,5 8,6 0,2 0,0 0,2 0,1 0,0 Exploration -80% 0,2 0,0 1,7 1,0 1,6 1,3 Downstream -49% 6,7 1,9 0,1 0,0 2,1 2,1 1
Slide 9: Cost Efficiencies: efficiency opportunities achieved since 2015
Cost Efficiencies: To navigate this price scenario, efficiency opportunities have been accomplished since 2015. The target for 2016 is ~ USD$500 M. 2015-2016 savings iniciatives 1Q 2016 achieved Savings USD$ Millions USD$ Millions 2015 Achieved Savings* 1.000 2016 Target** 214 Fixed Costs 102 64 108
Slide 10: Profitable Barrels: structural efficiencies and cost reduction
Profitable Barrels: Ecopetrol is working to obtain structural efficiencies and sustained cost reduction in order to ensure profitable operations Lifting Cost Drilling Days USD/bl -9,5% 34 -34% 36 -39% Average Drilling Days 26 26 22 19 7.4 6.7 14 12 14 4.8 2015 1Q2016 LTM** Castilla Chichimene 15 wel
Slide 11: Procurement Strategy: new supply model
Procurement Strategy: New supply model brings to Ecopetrol the opportunity to increase value creation and achieve significant savings IMPACT Savings TOTAL 2016 vs. 2015 Savings- Contract 5-7% Strategies Procurement and contract plan 170-200 Cost-Efficiency of procurement USD$ Millions process 50% sa
Slide 12: Ecopetrol is Re-inventing the Organization
Ecopetrol is Re-inventing the Organization Talent Management and Culture Transformation Leadership Program Management Team Renovation New Culture and Leadership With International Experience* Model Re-inventing ourselves to compete globally Professional Development Relationship with Unions Excellenc
Slide 13: Agenda
Agenda 1. 2016 a year of Transition 2. Preparing for structural changes 3. New possibilities: Doing more with less 4. 2017 and beyond 12
Slide 14: Production: investment focused on value generation
Production: Investment focused on value generation and mitigate the negative impact on production, leveraging our assets in Colombia Corporate Group Production Thousand barrels per day (kbpd) 754 788 755 761 724 737 715 2011 2012 2013 2014 2015 1Q2016 2016 e 2015 2016 CAPEX Production 3,282 1,116 US
Slide 15: Exploration: robust and diversified exploratory portfolio
Exploration: The main objective is create a robust and diversified exploratory portfolio with high quality plays Exploration activity in 2016 North ECOPETROL AMERICA OFFSHORE COLOMBIA • LEON 2 APPRAISALS WELL • DRILL IN 2016 APPRAISAL America WELL KRONOS-2 COMPLETED GoM • DRILL IN 2016 WARRIOR KRONO
Slide 16: Downstream: increased refining capacity
Downstream : Ecopetrol has increased its refining capacity, improving the conversion to high-value products and clean fuels. Refining Capacity Product Mix - Reficar* Thousand barrels per day (kbpd) % 80 Kbpd 165 Kbpd Conversion Level 250 250 245 2% 3% Low Medium High 2% 5% 220 • Gasoline 300 ppm Pro
Slide 17: Midstream: transport capacity has increased
Midstream : Transport capacity has increased with a consistent cash flow generation for the Group Pipeline System Capacity(1) Thousand barrels per day (kbpd) 1445 1276 1301 1310 1096 352 385 385 307 307 2012 2013 2014 2015 2016 e Oil Pipelines Poliducts Higher revenues and net income driven by (i) t
Slide 18: Financial Excellence: Reduction in Direct and Indirect Personnel
Financial Excellence: Reduction in Direct and Indirect Personnel Personnel* 53,600 -48% 39,000 # of personnel 44,450 28,000 30,300 19,300 9,150 8,700 8,700 2014 2015 1Q 2016 Direct Personnel Outsourcing Ecopetrol´s total personnel including outsourcing, decreased from 53,600 in December 2014 to 28,0
Slide 19: Agenda
Agenda 1. 2016 a year of Transition 2. Preparing structural changes 3. New possibilities: Doing more with less 4. 2017 and beyond
Slide 20: Strengthening Exploration and Production portfolio; capex 2016-2020
Ecopetrol continues to strengthen its portfolio of Exploration and Production to seize opportunities that may be generated in the next cycle of high oil prices CAPEX 2016-2020 % 1% 3% 14% 7% 38% 2017 -2020 the 90% Company will invest more in Upstream. 47% 2016 2017-2020 (e) (average per year) UP DOW
Slide 21: 2017 and beyond
2017 and beyond: Ecopetrol continues to position itself for the future in order to ensure growth in the long term, financial sustainability and value creation Flexibility Ensure Financial Efficiencies Strength Association Scenario Strategy Planning with Partners 20
Slide 22: Restricted use notice
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.