Ecopetrol Profit Slips on Lower Oil and Higher Transport Costs

Ecopetrol SA (ECOPETL), Colombia’s largest oil company, said profit dropped for a second straight quarter on lower crude prices and rising transport costs.

Consolidated net income slid 6.8 percent from a year earlier to 3.41 trillion pesos ($1.8 billion), the Bogota-based company said yesterday in a regulatory filing after the market closed. Profit exceeded a 3.3 trillion-peso estimate of four analysts that excludes some items in a Bloomberg survey.

“The results were in line with our expectations, and reflect the increase in heavy crude production, lower international hydrocarbons prices and the expected rise in transport costs,” Chief Executive Officer Javier Gutierrez said in the report.

Colombia’s oil sector has attracted record levels of foreign investment over the past decade, boosting output to more than one million barrels per day this year. Production at Ecopetrol, the world’s seventh-largest oil company by market capitalization, climbed 2.1 percent in the second quarter from a year earlier to 778,100 barrels of oil equivalent per day.

Sales rose 6.6 percent to 17.6 trillion pesos while earnings excluding taxes, interest, depreciation and amortization rose 1.3 percent to 7.52 trillion pesos.

Ecopetrol on April 1 completed the transfer of its hydrocarbon transportation assets to its Cenit subsidiary, the company said. It sees higher transport costs in coming quarters being offset by higher earnings from the unit.

Cenit President Camilo Marulanda said in a May 22 interview that the company will boost the capacity of Colombia’s oil storage facilities and reinforce sections of pipeline to counter rebel attacks.

Pipeline Attacks

Colombia’s largest rebel group, the Revolutionary Armed Forces of Colombia, or FARC, stepped up attacks on oil installations this year, to derail what President Juan Manuel Santos calls one of the country’s growth “locomotives” and to strengthen its hand at peace talks in Havana. The Ministry of Defense reported 113 attacks on oil pipelines in the first six months of this year, up from 68 in the same period a year ago.

Central bank governor Jose Dario Uribe said June 28 that high oil prices had offset falling prices for Colombia’s coal, gold, coffee and nickel exports. The bank’s terms of trade index, which measures the prices of Colombia’s exports relative to the cost of imports, has risen 1 percent this year.

Colombia’s government owns 88.5 percent of Ecopetrol and has no plans to sell any part of its stake in the oil company, Finance Minister Mauricio Cardenas said July 29.

Ecopetrol shares rose 0.7 percent to 4,335 pesos in Bogota trading yesterday.

To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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