Colombian National Oil Company Energy for the Future Investment Conference BID December 9th, 2008
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks
Colombia has a very transparent and stable regulatory and institutional framework for the oil and gas sector Institutional Structure Regulatory and legal framework Favorable and stable contractual system All companies compete under…
The Colombian economy has experienced strong growth, reflecting investor confidence and increasing foreign investment Foreign Direct Investment Thousand USD Oil sector competitiveness of E&P contract 10.240 9.028 Contractual and…
Since 2003, Colombia has entered into a new Favorable economic environment and strong industry framework exploratory cycle 30.000 80 High Impact Discoveries 70 CAO LIMON A NEW EXPLORATORY CYCLE 25.000 SAN FRANCISCO 60…
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks 7
EC is a vertically integrated O&G company with a unique track record in the industry and is positioned to be a global energy player Historical events 1905: De mares and Barco concession 1951: Ecopetrols incorporation 1960: First…
EC is present in most of the subsectors of the O&G chain in Colombia and has a leading market share Portfolio highlights Direct Market Share P1: 1,499 MMBOE Total: 74% Exploration Reserves (gross) Oil: 70.1% as of Dec. 2007 Gas:…
EC is the largest company in Colombia with strong financial metrics Key financial highlights (In US bn) September 30, 2008 September 30, 2007 12,2 Revenues 7,6 6,3 EBITDA 4,0 4,4 Net Income 1,9 Source: Ecopetrol.…
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks 11
ECs investment highlights Strengthened economic environment and strong industry framework in Colombia 1 Outstanding financial performance and Quality of asset 7 2 resources to support base and reserves growth World-class…
A solid foundation supports our strategy to capture growth opportunities Strategy map Upstream Downstream Mainly focused on the upstream Selectively capture business downstream opportunities Organic and acquisition Clean fuels and…
EC goals by 2015: one million barrel oil, moving into the 27th firsts companies of the PIW ranking (current ranking No. 39) Produce 1 Million Increase refining barrels of oil capacity to 650 MBOD equivalent per day Add reserves by…
EC is investing US 60 Billion from 2008-2015 to achieve its goals 25 0,6 20 1,2 3 Internal 15 4 Organization 10 USD 2 billion 5 11,2 0 Downstream Downstream USD 20 billion Energy&Biofuels Transport New Business (Retail)…
Upstream Downstream First class partners are part of our strategy Some of our Partners: Upstream Downstream BP GLENCORE BHPBILLITON OCENSA CEPSA OLEODUCTO DE CHEVRON COLOMBIA EXXONMOBIL HESS GROUP HOCOL- MAUREL ET PROM…
Upstream ECs future growth is mainly focused on the upstream business Organic and acquisition growth Further development of existing asset base Enhance recovery factor in brown fields (La Cira-Infantas and Cantagallo) Heavy…
Exploratory activity has increased over the past five years Ecopetrols exploratory activity (No. of wells and Km of seismic) Ecopetrol Direct Ecopetrol Joint Venture Ecopetrol and partners seismic (Equivalent km) 6.767 12 9…
Upstream EC has been able to maintain a strong reserve base Crude oil and natural gas gross reserves1 (MMBOE) 115 21 142 41 148 48 1.565 1.558 1.499 Dec. 2005 Revisions Extensions Production Dec. 2006 Revisions Extensions…
EC has been able to manage operational costs below the industry average Finding and development costs (US/Bl) Lifting costs (US/Bl) Finding Development 13,4 7,2 6,93 11,9 10,1 5,2 6,4 3,3 4,3 3,4 2005 2006 2007 2005 2006…
Upstream ECs oil production profile shows a positive trend Production evolutionMBOED 1000 190 385 399 444 367 367 376 85 810 75 61 65 69 72 292 306 311 316 327 359 2003 2004 2005 2006 2007 Up to Sep. 08 2015…
ECs natural gas business provides attractive Upstream opportunities due to market dynamics Local sales of Natural Gas (GBTUD) Natural Gas Highlights OUTLOOK 1100 70 MMFCD realized from Cusiana plant expansion, and additional…
Upstream EC is diversifying its portfolio with new opportunities abroad Local Exploration Projects International Exploration Projects Offshore Caribbean Round Tayrona GULF OF Caribbean Round MEXICO Fuerte K2 7 Blocks…
Upstream Investments are targeting new reserves through E&P operation Reserves Addition 2008-2012 per year 436 MMBOE 80 International MMBOE 23% 100 National 77% 256 1 Exploration Development of fields…
Downstream Selective capture of downstream opportunities, synergies and higher margins Downstream investments Achieve balanced integration 700 Main refinery projects: Increase capacity (approximately doubling) 600 325 Deep…
Ecopetrol continues improving its refining performance while meeting the local demand of oil products Utilization Barrancabermeja Cartagena 300 305 296 312 310 305 77(96%) 78(98%) 72(91%) 80(100%) 80(100%) 80(100%) 223 227 224…
Downstream Propilco acquisition supports our petrochemical business The acquisition of Propilco is key to Ecopetrol's new growth strategy ,which seeks to transform oil and gas into products with a higher added value and with…
Downstream Achieving leadership in petrochemicals in the country and the region 2,700 Capture margins Take advantage of gas and refined product synergies Thousand Tons / Y Domestic and regional market potential Polypropylene…
Ensuring transport capacity and logistics by Downstream optimizing assets integration C ar tagena refinery Network expansion for heavy oil: 450 km of new lines: Rubiales-Porvenir for heavy oil Apiay Porvenir for heavy oil…
EC is improving its environmental, safety and security indicators Environmental incidents Accidents Frecuency of combined accidents (per mm of worked hour) 112 88 5,8 59 43 2,6 1,8 1,9 2005 2006 2007 Up tp Sep.08 2005 2006…
Leader in biodiesel and energy diversification in Downstream Colombia 900 Achieve 30% and 70% market share for 720 ethanol (200-300 MTons/y) and biodiesel Thousand Tons / Y (700-800 MTons/y) respectively Electrical…
Recent transactions prove Ecopetrols Upstream Downstream capacity to acquire assets and win concessions in a competitive environment Selected strategic transactions Gulf of Mexico E&P asset: Caribbean oil bid round in Polypropilene…
Creating a world class workforce to support our business strategy Strong corporate culture and developing Importance of research and development competencies for employees In 2006 Ecopetrol established the Leadership The Colombian…
Corporate social responsability Clear commitment to our stakeholders Maximize the value of the company and a reasonable profitability level Clear rules in a mutual profitable Shareholders Assure customer satisfaction and…
Ecopetrol has high-standards of corporate governance practices driven by an independent Board of Directors Corporate Governance Code Unilateral Statement of the principal shareholder (The Nation 89.9%) In compliance with IFC, OCDE…
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks 36
Consistent revenue growth Revenues by segment (USD in millions) Transportation and other Refining Production 11.085 79.3% 9.127 8.640 7.700 5.721 6.478 6787 61% 4.820 4.506 52% 4.066 3.273 3884 35% 3.905 45% 1.337 1.350 2003…
with improving operating margins and cash generation Costs and expenses (USD in millions) Operating Expenses Variable costs* Fixed costs 6.436 6.722 5.647 594 4.799 666 4.333 4.498 3.994 485 3.318 4.623 2.447 2.452 1.566…
and higher levels of profitability with an attractive dividend policy Net income (USD in millions) 4.404 2.571 1.615 1.684 1.881 789 1.048 2003 2004 2005 2006 2007 Up to sep.07 Up to sep.08 Source: Ecopetrol Dividends…
Capacity to fund growth through optimization of the capital structure Balance sheet (USD bn) Assets Equity Liabilities Source: Ecopetrol 15,0 13,3 10,3 10,3 27,8 6,6 23,9 5,0 21,2 20,9 4,6 16,2…
Outstanding financial performance and resources to support growth Strong price per share performance since the initial public offering Price per share performance and volume (base 100) 180% 180% 160% 160% 140% 140% 120% 7%…
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks 42
Closing remarks We are a growing vertically integrated Oil & Gas company with Excellent operating and financial track record demonstrated by (i) attractive level of production growth and reserve replacement, (ii) improved margins,…
Presentation will be available at www.ecopetrol.com.co 44
INVESTMENT DECISION CRITERIA Contribution to MEGA NPV = 0 Discount rate = WACC E (NPV) Exploratory Projects = 0 Return on Investment PIR Profit Investment Ratio Projected NPV /PV Investment = 1 Price Forecast = Low 45
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