Colombia Opens Door to Sale of Ecopetrol Block Stakes 2015

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Colombia’s state-controlled oil company Ecopetrol SA may sell stakes in some production assets as soon as this year as part of efforts to reduce risk and spending, said Simon Gaviria, head of the National Planning Department.

“It could happen this year if you recalibrate the portfolio to make sure that, in our back-to-basics strategy, Ecopetrol works on its basic assets,” Gaviria, who is an Ecopetrol board member, said in an interview in Washington.

The possibility of farm-outs -- the assignment of part of an oil or mineral interest to a third party -- comes as Ecopetrol strives to focus on core oil operations amid the slump in international prices. The rout, coupled with lagging production, is already weighing on results, with the company posting its first quarterly loss since shares started trading in 2007. The company owns stakes in sectors ranging from petrochemicals to electricity transmission and generation.

Ecopetrol may, for example, sell its stake in energy investment company Invercolsa SA as soon as this year, Gaviria said.

Its strategy to divest non-petroleum assets “should be yearlong, and it is probably not limited to sale of that asset,” he said. It involves “all of non-core assets.”

Ecopetrol could seek as much as $450 million for Invercolsa, about four times its book value, two people with direct knowledge of the matter said in February. Earlier this month, the government authorized Ecopetrol to sell its stake in Medellin-based transmission company ISA after last year authorizing the sale of its stake in power company EEB.

Worst Performer

Ecopetrol could also this year accept bids from companies seeking to operate its Rubiales field if it decides not to do so itself, Gaviria said. Pacific Rubiales Energy Corp. currently operates the field, and its contract expires in 2016.

Ecopetrol recorded a net loss of 844 billion pesos ($338 million), in the fourth quarter. While the company’s shares have rallied 10 percent in the last three months, they are down 47 percent in the past year, the worst performance among peers tracked by Bloomberg.

Low oil prices will continue to depress earnings in the first quarter, CEO Juan Carlos Echeverry said April 16.

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