Colombian National Oil Company Energy for the Future Andean Investment Conference Citi Investment Research October 21st, 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 exploratory cycle 30.000 80 High Impact Discoveries A NEW EXPLORATORY CYCLE 70 CAO LIMON 25.000 SAN FRANCISCO 60 Equivalent seismic kilometers APIAY No. of exploratory…
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) August 31, 2008 Dec 31, 2007 11,9 Revenues 11,1 6,2 EBITDA 5,2 4,0 Net Income 2,6 Source: Ecopetrol. Colombian…
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 company, among the 27th firsts companies of the PIW ranking Produce 1 Million Increase refining barrels of oil
EC is investing US 60 Billion from 2008- 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…
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…
With an increasing exploratory activity 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…
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 managed operating costs below the industry average Lifting costs (US/Bl) 7,2 6,57 5,2 3,3 2005 2006 2007 Jan-Aug.-2008 Source: Ecopetrol Finding and development costs (US/Bl) Finding Development 13,4 11,9…
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 International MMBOE 80 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…
EC continues improving its refining performance while Downstream meeting the local demand of oil byproducts Throughput and utilization Barrancabermeja Cartagena Utilization 300 305 296 312 310 307 (%) 77(96%) 78(98%) 72(91%)…
Downstream Selective capture of downstream opportunities, synergies and higher margins Recent Propilco acquisition supports our petrochemical business Production and capacity (TM In thousands) Petrochemicals sales (USD in…
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 Cartagena refinery Network expansion for heavy oil: 450 km of new lines: Rubiales-Porvenir for heavy oil Apiay Porvenir for heavy oil…
Ecopetrol 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 36 2,6 2,0 1,8 2005 2006 2007 Jan-Aug.-2008…
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 Caribbean oil bid round in Polypropilene acquisition in Gulf of…
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- 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,…
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks 36
Consistent revenue growth Revenues by segment (USD in milions) 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…
And an attractive dividend policy Dividends declared per share (USD cents) Dividends declared per share Payout ratio 131,9% 89,9% 72,8% 61,5% 61,5% 1,58 1,77 2,73 6,1 5,71 2003 2004 2005 2006 2007 Note: In 2006 USD 706…
Capacity to fund growth through optimization of the capital structure Balance sheet (USD bn) Assets Equity Liabilities 14,7 13,3 9,3 10,3 28,8 6,6 23,9 5,0 21,4 20,9 4,6 16,2 14,1 13,9…
Agenda Colombia oil & gas sector framework Company Overview Growth Strategy Financial performance Closing remarks 41
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 43
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 44
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