Ecopetrol has repaid a $1.93 billion USD loan that was due in February 2020, the state-controlled oil and gas company said in a statement. The company said that this payment fulfills “its entire syndicated bank loan contracted with international banking.”
The decision to make the early payment is the result of what Ecopetrol called its “solid cash position, which by the end of the first quarter of 2017 amounted to more than $6 billion USD.” Among other credit-related benefits, the company says that its debt-to-earnings (EBITDA) ratio has improved to 2.3 times, down from the previous level of 2.6 times.
The Bogotá-based company stated that it is not concerned about the reduction in cash on hand even after making the large payment. Ecopetrol believes that paying the loan off now is “in line with the objectives of the 2020 business plan” and will help solidify its credit rating.
“The group’s cash position will remain sound, allowing it to adequately address fluctuating crude price scenarios, maintaining the pace of investment for organic growth opportunities, as well as being able to realize potential inorganic growth for the acquisition of reserves,” stated Ecopetrol.
In March, credit rating agency Fitch Ratings affirmed Ecopetrol‘s BBB rating and upgraded its outlook from negative to stable. In an assessment this month, however, New York-based Moody’s Investor Service announced that it will maintain its negative outlook for Ecopetrol, along with affirming the firm’s Baa3 investment grade rating. Moody’s highlighted the remaining risk associated with Ecopetrol’s low 6.7 years of reserve life even though “the company’s liquidity and financing flexibility supports organic and inorganic reserve replacement.”
The early payment made today follows a similar move made last October when Ecopetrol paid off a $340 million USD loan from Bancolombia that wasn’t due until 2024. Ecopetrol has credited is favorable cash position to the $1.5 billion USD in savings it has realized from 2015 to date.
For 2017, the company has set its sights on replacing reserves. Its operating plan has more than doubled exploration investment and drilling efforts.
“Adding reserves and maintaining the pace of production are the company’s focus,” said CEO Juan Carlos Echeverry in March. “The exploration campaign will be stepped up significantly in regions of high prospectivity. Investment in exploration will rise from $280 million USD to $650 million USD, thus increasing offshore wells from two to six and onshore wells from five to 11 from 2016 to 2017.”