Ecopetrol Reports Big Jump with Profits of $866 Million in the Third Quarter Amid Surging Oil Prices

Amid surging global oil prices, Colombian state-controlled oil company Ecopetrol (NYSE: EC) (BVC: ECOPETROL) reported a net profit of nearly 2.78 trillion Colombian pesos (roughly $866 million) in the third quarter nearly three times as much as it brought in during the same period of 2017 (1 trillion pesos).

For the quarter, the Bogotá-based company reported earnings (EBITDA) of 5.7 trillion pesos and hit an average production of 724,000 barrels of oil equivalent per day, the highest output in two-and-a-half years, according to company figures.

“These solid financial results,” said company CEO Felipe Bayón Pardo in a statement, “were achieved due to the good operating performance of all segments…In summary, we were able to capture the profit coming from the higher international oil prices.”

While prices have since retreated significantly, the price of the benchmark Brent crude hit $86 USD per barrel in September, the highest level since 2014.

Through three quarters, Ecopetrol’s year-to-date net profits hit almost 8.91 trillion pesos (2.78 billion USD) and EBITDA reached nearly 23.76 trillion pesos (some $7.4 billion USD), the best results for the Bogotá-based company over the same period in the past four years.

Bayón in part also credited higher crude demand from Asia for the recent jump, with sales to the region accounting for a full 45% of the overall sum in the quarter, up from just 25% in the third quarter of 2017.

The uptick in production also helped, said Bayón. The increase “was possible due to the positive results from our drilling campaign and the greater demand for natural gas in the thermal power and industrial sectors,” he said. “At the end of the quarter, we had drilled 421 development wells and had 41 rigs in operation.”

The company is continue to prioritize its production and discovery agenda, investing $789 million USD during the quarter while drilling five more exploratory wells. This brought the number of exploratory wells drilled in 2018 to nine, although it will need to increase this investment figure in the fourth quarter to hit its stated annual investment goal.

“These results are in line with the goal of drilling 12 wells in 2018,” said Bayón, “and materialize our strategy of building a solid base of assets for the company’s future sustainability.”

Ecopetrol’s investment also included the joint exploration bid the company won, along with BP Energy and CNOOC Petroleum, in the lucrative Pau-Brasil block within the Santos Basin off the coast of Brazil.

At the same time, Ecopetrol largely sidestepped major fallout from a labor dispute with its USO Petroleum Workers Union by signing a new contract through 2022. Though there was a brief strike by the workers, the collective bargaining process proceeded quickly enough to secure a deal before large-scale disruption occurred.

“The New Collective Bargaining Agreement is aligned with the business strategy that seeks to maintain efficiency, capital discipline, and collective labor in the new phase of Ecopetrol’s growth,” said Bayón. “We believe it will contribute positively to the workers wellbeing and the country’s development.”

The chief executive also praised results at Ecopetrol’s two refineries in Cartagena on the Caribbean coast and Barrancabermeja in the department of Santander. Together, they “achieved a new historic maximum of 380,000 barrels of stable throughput per day,” said Bayón.

The company was able to record these figures while at the same time further reducing the sulfur content within the diesel fuel it distributes within Colombia. In response to ongoing complaints about air quality, particularly in Medellín, Ecopetrol launched a campaign to cut sulfur, and in the third quarter it made significant progress, bringing the particulate levels near U.S. standards.

“Ecopetrol remains committed to generating value, and caring for environment, safe operations, ethics and transparency,” said Bayón. “Maintaining positive results and growing profitably will remain our focus as we continue to operate as a sustainable company that generates value for its shareholders.”