The offshore well, drilled by the Bolette Dolphin vessel at a depth of up to 4.4 kilometers below water and some 1.3 kilometers below the seabed, is located in the same geological area as the previously found Kronos field, which is home to the Purple Angel-1 well that recently confirmed an extension of this field.

The first discovery in the area involving Ecopetrol came from the Kronos-1 well in August 2015. Gorgon-1 sits about 27 kilometers north of Purple Angel-1.

There are now a total of four blocks in this area (Purple Angel, Fort South, Fort North, and Col-5), all of which are operated by Texas-based Anadarko Petroleum Corporation. Ecopetrol holds a 50% stake in each of the blocks, which collectively span nearly 15,000 square kilometers.

Given the proximity of the finds to one another, Ecopetrol believes it may be possible to extract the resources more efficiently and profitably by sharing production facilities across the various projects. The company says it will continue to study the underlying conditions to gauge the feasibility of this idea.

“We are pleased to be able to announce this third discovery in the southern Colombian Caribbean,” said Juan Carlos Echeverry, president of Ecopetrol. “The results confirm that Colombia can count on a new area for the production of gas, a clean fuel with growing demand in the international market. This discovery will be important for the future of Colombia’s gas supply. The exploratory successes of the Caribbean are part of Ecopetrol’s strategy that, since 2017, has focused on increasing hydrocarbon reserves.”

In its 2017 budget, Ecopetrol more than doubled its planned investment in exploration compared to 2016. “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,” said Echeverry earlier this year.

Image credit: Ecopetrol

Through its Ecopetrol America Inc. subsidiary, the state-controlled Colombian oil giant has a 20% stake in the well. Anadarko Petroleum Corporation and Anadarko US Offshore LLC operate the well and hold a 65% stake. MCX Exploration LLC controls the remaining 15% of the well.

Ecopetrol, which just increased its stake in Warrior from 15% to 20% in August, expects the well to use the production facilities of the nearby Marco Polo platform, which is also operated by Anadarko.

“We are pleased to end the year with this significant discovery that contributes to our primary goal of increasing reserves,” said Juan Carlos Echeverry, president of Ecopetrol. “This success demonstrates Ecopetrol’s ability to strengthen its presence in one of the most prosperous oil areas in the world, the Gulf of Mexico. We needed to improve the aim in exploration and we are doing it.”

The Warrior well marks the fifth Ecopetrol discovery in the United States, a region where the company’s production has tripled throughout 2016, from just 3,500 barrels per day in July to around 12,000 per day now. The company is also encouraged by another find that comes through a strategy to partner with other companies in order to diversify exploration risk.

The bulk of the firm’s U.S. output comes from its 31.5% stake in the Gunflint well that started producing oil this year in the Gulf of Mexico, hitting 20,000 barrels of oil equivalent output per day in mid-August. Another contributor is its 9.2% holding in the K2 field, which is located just a few kilometers from the Warrior and Marco Polo sites.

In the past, Ecopetrol has made discoveries in the United States in Rydberg and Leon in 2014 following its first two discoveries at Dalmatian South and Parmer in 2012.

Ecopetrol is also partnering with Anadarko on a well in the Caribbean. They were expected to begin drilling on their Kronos discovery in Colombian waters this year.

The state-controlled oil giant already increased its production by 3.9% this quarter over the second quarter — to hit 723,000 barrels of oil equivalent per day — and that is only set to grow further, said Ecopetrol CEO Juan Carlos Echeverry.

“The group has overcome the period of low oil prices and has returned to the path of growth in production,” said Echeverry. He added that, “Ecopetrol has an optimistic view of the future.”

Financial Results

The Ecopetrol Group reported an EBITDA of 4.9 trillion Colombian pesos ($1.55 billion USD) and an EBITDA margin of 40% in the third quarter. Net profit attributable to Ecopetrol shareholders in the third quarter rose to COP 229 billion pesos ($72.6 million), per the company.

In terms of EBITDA and EBITDA margin, this was the best showing in the last five quarters for Ecopetrol. Echeverry credits the success to rising crude prices, austerity measures implemented earlier this year, capital discipline, and better efficiency. “This good result demonstrates our commitment to operational excellence, cost efficiency, and capital discipline,” said the chief executive.

The results and capital situation have improved enough this year that Ecopetrol opted to pay off a $340 million USD loan from Bancolombia early. The funds weren’t due until 2024, but its prepayment last month”was made possible by the solid cash position of the company as a result of cost efficiencies,” said Ecopetrol in a statement.

Market Response

The market response to the news has been active. More than 650,000 Ecopetrol shares traded hands yesterday, according to the Press Telegraph, and it has gained a bit of steam on the New York Stock Exchange.

The uptick since the results were publicized has added to a minor rally in the lead up to the announcement that has taken the share price from $7.69 USD on November 11 to $8.22 in mid-day trading today.

Shares for the beleaguered firm remain well below their 2016 high of $10.00 seen in mid-July, which followed a bottoming out in January 20 of just $5.40. At the company’s soaring heights in mid-2013, shares were trading at more than $63 on the New York Stock Exchange.

Production Increases

A big win for Ecopetrol’s results this year was its takeover of the Rubiales field, the largest oil-producing area in Colombia. In a move announced in the summer of 2015, it officially ended its long-time partnership with Pacific Exploration & Production Corporation this July to assume a 100% holding in the lucrative field.

Some questioned whether the transition would be seamless and if Ecopetrol would be able to pull the same margins as it assumed all operating responsibility. Production at the site has dropped — but only slightly — so thus far, Echeverry says he has been pleased with the results.

“Although during the quarter the production of the field continued to decline from 138,000 barrels per day to 127,000 barrels per day, it’s noteworthy that the challenge of resuming the 100% of the operation was successful,” stated Bancolombia in a note to investors. “The declines reported are due in part to the few investments made during the first half by its former operator.”

Production also began this year at the Gunflint site in the Gulf of Mexico, where Ecopetrol has a partial stake in what is expected to become one of the best holdings for its Ecopetrol Americas subsidiary. “We’ve started to reap the benefits of investments made in previous years,” said Echeverry of the Gunflint project.

Additionally, the company commenced in the startup of 34 units at the Cartagena refinery in July, when it “initiated the stabilization and performance testing period,” said Echeverry.

In a conference call, it elaborated on its expansion plans going forward. “The company indicated that during the remainder of the year and during 2017 it will continue exploration activity both offshore and onshore,” stated Bancolombia. “In the short term, drilling of appraisal wells is expected in search of a better understanding of the reservoir around the already announced exploratory success at Kronos. Also important will be the drilling of the Molusco well, the first 100% offshore well held by Ecopetrol, where work would begin towards the third quarter of 2017.”

Ecopetrol CEO Juan Carlos Echeverry

After drilling at a water depth of 1584 meters (5195 feet), the well reached total depth of 3720 meters (12200 feet) and encountered a net pay thickness between 40 to 70 meters (130 to 230 feet) of gas bearing sandstones.  Ecopetrol and Anadarko’s integrated technical teams are continuing to evaluate the Kronos discovery results. As of publication, the drilling operation continues, aiming to reach a deeper target to determine possible additional results.

“We are pleased to announce this discovery in Colombian Caribbean deepwater, this time accompanied by Anadarko. This discovery adds to the one accomplished in December at the Orca-1 well, located in the deep water of Tayrona block offshore Guajira, where we are partners with Petrobras, Repsol and Statoil. These results are very important and confirm the potential of the Colombian Caribbean petroleum system in a vast area and are aligned with Ecopetrol´s new strategy, in which one of the key areas is the exploration on high potential marine basins,” Ecopetrol president Juan Carlos Echeverry said.

The Bolette Dolphin drilling ship at the Kronos -1 site in the Colombian Caribbean Sea, Southwest of Cartagena

In 2012, the Ecopetrol – Anadarko partnership began exploratory operations in the South Caribbean in blocks Fuerte Norte, Fuerte Sur, COL5, URA4 and Purple Angel. Once activities at Kronos-1 are concluded, the drillship Bolette Dolphin, employed in this operation, will move to Fuerte Norte Block to continue drilling Calasu-1 well, located 145 Kilometers or approximately 100 miles north east of Kronos-1.

Anadarko, is one of the most experienced companies worldwide in deepwater and ultra-deepwater exploration, project management and execution. Currently Anadarko is executing the biggest seismic acquisition campaign in the history of the Colombian Caribbean with an extension of more than 16,000 square kilometers.

Images courtesy of Ecopetrol.