Ecopetrol Sa · BVC:ECOPETROL
Ecopetrol Sa — Investor Presentation (January 2009)
40 slides from Ecopetrol Sa's investor presentation, January 2009
Slide 1: Colombian National Oil Company: Investors Presentation
Colombian National Oil Company “Energy for the Future” Ecopetrol S.A. Investors Presentation January 2009 0
Slide 2: Disclaimer
Disclaimer This document was prepared by Ecopetrol S.A. with the purpose of providing the market and interested parties certain financial and other information of the Company This document may include strategy discussions and forward-looking statements regarding the probable development of Ecopetrol
Slide 3: Highlights – Ecopetrol S.A. (1/2)
Highlights – Ecopetrol S.A. (1/2) 1 Competitive Landscape • Ecopetrol is one of the top four oil and gas companies in Latin America. Since 2003, the Company has undergone significant change, transforming itself into an important player that is competitive with the world’s most important oil companie
Slide 4: Highlights – Ecopetrol S.A. (2/2)
Highlights – Ecopetrol S.A. (2/2) 4 Financial Performance - Ecopetrol’s revenues have consistently increased during the last five years due to increased production and higher market prices. Thanks to cost control measures, profitability has risen. Currently, the Company’s balance sheet has no financ
Slide 5: Agenda
Agenda Context Company Overview Growth Strategy Financial performance Corporate Governance and Senior Management 4
Slide 6: The Colombian economy has experienced strong growth and greater investor confidence
The Colombian economy has experienced strong growth, increasing foreign investment, and greater investor confidence Real GDP (% change) and credit rating Credit rating BBB- Investment grade BBB- BB+ BB+ BB+ BB BB BB- Foreign direct investment (USD$bn) 38% 17% 11% 28% 35% 18% Consumer Price Index (%)
Slide 7: In 2003, Ecopetrol began to transform itself into a global energy player
In 2003, Ecopetrol began to transform itself into a global energy player Key milestones From a local oil & gas company… …. To a global energy player 1905: De mares and Barco concession Internal transformation 1951: Ecopetrol’s incorporation Internationalization 1960: First crude oil discovered
Slide 8: Agenda
Agenda Context Company Overview Growth Strategy Financial performance Corporate Governance and Senior Management 7
Slide 9: Ecopetrol has a leading market share in most segments of the oil and gas chain
Ecopetrol has a leading market share in most segments of the oil and gas chain in Colombia Portfolio highlights Business Area Current levels Market Share • Exploration P1: 1,499 MMBOE 62% Reserves (gross) • Oil: 70.1% Dec 07 • Gas: 29.9% Total: 446 MBOED • Production (gross) Oil: 57% • Oil: 358 MBOE
Slide 10: Ecopetrol's exploratory activity also increased as of 2003
Ecopetrol s exploratory activity also increased as of 2003 Ecopetrol’s exploratory activity (No. of wells and Km of seismic) 12 9 9 4.584 8 3.470 6.767 3 4 4 3.081 3.517 2.668 1 3 6 3 4 5 1 2003 2004 2005 2006 2007 Up to Oct.-2008 Ecopetrol Direct Ecopetrol Joint Venture Ecopetrol and partners seism
Slide 11: Ecopetrol is diversifying its portfolio with new opportunities abroad
Ecopetrol is diversifying its portfolio with new opportunities abroad, balancing its exposure to risk Local Exploration Projects International Exploration Projects Offshore Caribbean Round Tayrona GULF OF Caribbean Round MEXICO Fuerte K2 7 Blocks and 9 Venezuela new prospects Foothills BRASIL Gibral
Slide 12: Ecopetrol's production increased during the last five years and significantly in 2008
Ecopetrol’s production increased during the last five years and significantly in 2008 Gross production evolution (MBOED) Production regional breakdown CAGR 2003-08: 4.0% 738 K2: 0.3 mboed (0.1%) Gas 645 638 641 649 661 Catatumbo 446 Orinoquía 367 367 376 385 399 75 mboed (17%) 86 Tibú-Garcero- 61 65
Slide 13: Ecopetrol's growth strategy is mainly focused on the upstream business
Ecopetrol’s growth strategy is mainly focused on the upstream business Organic and acquisition growth Upstream Capex (USD million) • Further development of existing asset base • Enhance recovery factor in brown fields (La Cira- Infantas and Cantagallo) • Heavy crude projects (Castilla, San Fernando,
Slide 14: Ecopetrol continues to improve its refining performance
Ecopetrol continues to improve its refining performance while meeting the local demand for oil products Refinery runs and utilization (MBOD and utilization%) 77(96%) 78(98%) 72(91%) 80(100%) 80(100%) 77(97%) 223 227 224 232 230 232 (89%) (91%) (90%) (93%) (92%) (100.7%) Refining margin (USD per barr
Slide 15: Ecopetrol's natural gas business offers attractive opportunities
Ecopetrol’s natural gas business offers attractive opportunities due to market dynamics Natural Gas gross production (MMCFD) CAGR 2007-08: 18.7% Sales of Natural Gas (MMCFD) Selected natural gas projects • Sales contract subscription of natural gas for Gibraltar field, 30 Mcfd Export sales 90 (15%)
Slide 16: Price definition for gasoline, diesel and natural gas in Colombia
Price definition for gasoline, diesel and natural gas in Colombia Regulation Sales to public price – Dec 2008 (Bogota) Gasoline and Diesel Price definition • Gasoline: USD $3.38/gl* Taxes •Defined by the Ministry of Mines & Energy 31% •Gasoline: Resolution 8-2438 of 1998 • Diesel: Resolution 8-243
Slide 17: Ecopetrol has kept its operational costs below the industry average
Ecopetrol has been able to keep its operational costs below the industry average … Finding and development costs* (US$/Bl) Lifting costs (USD/BOE) * Three years average Refining costs (US$/Bl) Transportation costs (US$ Cents/Bl-Km) 16 Source: Ecopetrol
Slide 18: Agenda
Agenda Context Company Overview Growth Strategy Financial performance Corporate Governance and Senior Management 17
Slide 19: Mega Plan defines ambitious production targets for 2015
“Mega Plan” defines ambitious production targets for 2015 that call for Capex investment of US$ 60 billion during 2008-2015 “Mega Plan” From … ….To Capex investment 2008-15 of USD 60bn Current Goal Increase • Upstream 2008 2015 2008-15 • Production MBOED 446 1,000 2.2 X • Refining capacity MBOD 290
Slide 20: Ecopetrol has increased its yearly Capex investment by almost 10X since 2003
Ecopetrol has increased its yearly Capex investment by almost 10X since 2003 35% CAGR 2003-09: 42% 163% 6.224 4.621 40% 36% 12% 9% 1.760 849 1.255 762 922 Capex in USD million 2003 2004 2005 2006 2007 Py. 2008 Sol. 2009 09’/08’ Exploration 75 117 86 114 220 531 1.049 98% Production 397 515 613 822 1
Slide 21: Exploration Capex of USD$1.0 bn for 2009
Exploration Capex of USD$ 1.0 bn for 2009, a 98% increase vs. 2008 Exploration * Drilling Seismic , G&G USD$998 mn USD$732 mn USD$ 218 mn 32 G&G** 34 6.274 2 186 8 Seismic No. of wells KM Equiv. 732 24 7 Drilling 1.527 3 4 Local International Explotatory drilling Local International Local Internatio
Slide 22: Production Capex of USD 2.7bn for 2009
Production Capex of USD 2.7bn for 2009 represents a 36% increase vs. 2008 Production Capex 2009 Capex breakdown per field 4% In progress Investment (USD$mn) Direct Partnerships Seismic 23% Drilling 32% Main fields (60%) 890 567 Activity • Casabe 227 - 32% • Rubiales - 270 9% Plants and • Castilla 25
Slide 23: Production Capex in Colombia for 2009
Production Capex in Colombia for 2009 Gas Catatumbo Orinoquía Northeast US$ 391mn US$ 110mn Guajira-Cusiana-Cupiagua Tibú-Garcero-Petrolea-Cravo Norte Mature Fields Middle Magdalena Mature Mature Fields Fields US$ 909mn Casabe/La Cira/Yarigui Central US$ 841mn Gas Castilla-Rubiales-Chichimene Heavy
Slide 24: Agenda
Agenda Context Company Overview Growth Strategy Financial performance Corporate Governance and Senior Management 23
Slide 25: Consistent revenue growth with improving operating margins and cash generation
Consistent revenue growth together with improving operating margins and cash generation … Revenues by market (local and exports) (USD billion) CAGR 2003-08: 17.0% 36% 28% 64% 72% Costs and expenses (USD billion) CAGR 2003-08: 12% 4,0 4,3 4,8 5,6 6,4 5,0 7,0 0,6 0,7 0,5 2,8 4,8 1,7 1,6 2003 2004 2005
Slide 26: Higher profitability and an attractive dividend policy
… with higher levels of profitability, and an attractive dividend policy Net income (USD billion) CAGR: 150% CAGR 2003-07: 34.4% 4.5 2.6 2.2 1.0 1.6 1.7 0.8 2003 2004 2005 2006 2007 Up to Oct. 07 Up to Oct. 08 Dividends declared per share (USD cents) Dividends declared per share Payout ratio Note: I
Slide 27: Strong balance sheet with no financial debt
Ecopetrol has a strong balance sheet with no financial debt, and sufficient capacity to fund growth through optimization of its capital structure Balance sheet (USD billion) CAGR 2003-08: 14.9% 11,7 Assets 10,6 10,5 10,9 10,3 10,6 Liabilities 26,0 23,9 21,5 20,9 6,6 9,6 5,0 8,9 4,6 8,4 16,2 14,3 13,
Slide 28: Agenda
Agenda Context Company Overview Growth Strategy Financial performance Corporate Governance and Senior Management 27
Slide 29: High standards of corporate governance driven by an independent Board
Ecopetrol has high-standards of corporate governance practices driven by an independent Board of Directors Ownership structure – Oct 08 Corporate Governance Code Unilateral Statement of the principal shareholder (The Nation – 89.9%) In compliance with IFC, OCDE Clear dividend policy: minimum 70%
Slide 30: An experienced senior management team
An experienced senior management team, with an average of 13 years of industry service, leads Ecopetrol’s 6,500+ employees Javier G. Gutierrez P. Core business unit President-CEO 2 years Corporate Adriana Echeverri Chief Financial Officer 14 years Mauricio Echeverri Alvaro Vargas General Counsel Vic
Slide 31: Presentation will be available at www.ecopetrol.com.co/investors
Presentation will be available at www.ecopetrol.com.co/investors 30
Slide 32: ADDENDA
ADDENDA 31
Slide 33: Strong E&P metrics continue attracting key international players
Strong E&P metrics continue attracting key international players; Ecopetrol the preferred partner International players in Colombia Colombia’s total exploration activity Producer Dry Testing Seismic Kilometers 76 70 56 35 28 21 Source: ANH Colombia’s gross reserves evolution (MMBOE)* Colombia’s gros
Slide 34: Colombia has a transparent and stable regulatory and institutional framework
Colombia has a transparent and stable regulatory and institutional framework for the oil and gas sector Institutional Structure Regulatory and legal framework Policies Supervision & Control Favorable and stable contractual system • All companies compete under the same terms and conditions Modern and
Slide 35: First class partners are part of our strategy
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 LUKOIL MANSAROVAR NEXEN ONGC OXY PETROBRAS PERENCO • 27 partners in exploration R
Slide 36: A solid foundation supports our strategy – Mega Plan
A solid foundation supports our strategy to capture growth opportunities – Mega Plan Strategy map Upstream Downstream Mainly focused on the upstream Selectively capture business downstream opportunities Organic and acquisition Clean fuels and biodiesel growth strategy development Strengthe
Slide 37: Colombia entered a new exploratory cycle in 2003
As a result of important regulatory changes, Colombia entered a new exploratory cycle in 2003 Key regulatory changes 2000-04 2003: Beggining of a new • 2000: variable royalty scheme exploratory cycle • 2003: creation of ANH • 2004: new rules for contracting CAÑO LIMON Equivalent seismic kilometers S
Slide 38: Improving environmental, safety and security performance
… while improving its environmental, safety and security performance Environmental incidents Accidents CAGR 2005-08 (-26%) CAGR 2005-08: (-32%) Stolen products (BPD) Attacks to the transport infrastructure CAGR 2003-08: (-43%) CAGR 2003-08: (-30%) 37 Source: Ecopetrol
Slide 39: Sliding Scale Royalties
Sliding Scale Royalties Hydrocarbon production for field (kbpd) % of royalties Prod. <= 5 8% 5 < Prod. <= 125 8 + (Prod. kbpd - 5 kbpd)* (0.10) 125 < Prod. <= 400 20% 400 < Prod. <= 600 20 + (Prod. kbpd - 400 kbpd)* (0.025) Prod. > 600 25% Discount relative to light crude rates 1. Onshore, and offsh
Slide 40: Windfall profit clause
Windfall profit clause Contracts 2003-2008 New Contracts M (economic Payment : Pr Vc Q rights of M Payment : Pr Vc Q M ANH) Amount : Vc Q Pr: Price at delivery point (US$/BL) Vc: Volume of contractor (kbpd) Q: Take of ANH (%) P Po P Po Q (%) Q 30% Q S P P P: WTI or Henry Hub (for natural gas exporte