Ecopetrol plans to ramp up drilling over the second half of the year, opening up 80 new wells, according to chief executive Juan Carlos Echeverry. In a call with investors last week, Echeverry noted that the state-controlled oil company is now in a position to reverse course after retrenching in recent quarters amid plummeting crude prices.
After prioritizing “capital discipline” thus far in 2016, the oil giant now feels comfortable that, in line with its oil price estimates of between $50 and $55 USD per barrel next year, it can begin increasing output. “We feel now at the company that we can emphasize promoting reserves and production,” said Echeverry, according to Reuters.
The 80 sites will bring the annual total of new wells to 105, with 35 to be drilled in its Rubiales oil field, the nation’s largest. For decades, Ecopetrol had reaped the benefits of the field jointly with Pacific Exploration & Production, formerly known as Pacific Rubiales, but the company took over Pacific’s share in July after opting not to renew its long-time contract with the Canadian energy firm.
Taking full control of Rubiales has added 53,000 barrels per day to Ecopetrol’s production, “partially offsetting the impact of lower investments in other assets and the temporary suspension of some fields,” said Echeverry. With the addition of more output from this field, as well as production from the Cusiana oilfield in Los Llanos, the company has now eclipsed 500,000 barrels per day in output.
The bulk of the other new wells expected this year — another 35 — will be drilled in the Castilla field. In July, Echeverry said that the firm may open up as many as 1,000 new wells in the coming years if oil prices cooperate.
Even with — an albeit short-lived — rally in oil prices this spring, Ecopetrol saw its net profits drop by 48% in the second quarter of 2016, year-over-year, from 2015. It did nearly double its net income in Q2 over the first quarter of 2016, however, recording 787 billion pesos from April through June compared to just 363 billion pesos from January through March. Overall for the first half of 2016, the net profit drop was 31% versus the first six months of 2015.
In July, Ecopetrol also saw Fitch Ratings downgrade its long-term local-currency issuer default rating (IDR) to BBB from BBB+ and put its long-term foreign-currency IDR on negative watch. This followed the rating agency assigning Colombia’s sovereign rating a negative outlook, with similar fallout hitting Bancolombia, the nation’s largest bank.
“April marked my first year leading Ecopetrol, a year characterized by a sharp drop in oil prices, challenging the oil and gas industry,” said Echeverry.
The company is currently reviewing its 2017-2020 medium-term plan and expects to share these results with investors before the end of October. Echeverry noted that Ecopetrol has also restructured its management team over the past 16 months, appointing a new chief operating officer, chief financial officer, and chief transformation officer in addition to changing out executives several vice-president-level positions.
Photo: Ecopetrol’s Cusiana oilfield in Colombia’s Los Llanos region. (Credit: Ecopetrol)