In an interview with EL TIEMPO, Saúl Kattan, president of Ecopetrol’s operations board of directors, revealed that in the future it could be reviewed whether the fracking in the united states They continue to be part of the company’s portfolio.
«We are constantly evaluating investments and disinvestments as any company does worldwide, at the right time it will be necessary to exit investments. Sometimes, when investments are very successful or when they don’t work, you have to sell them«, he stated.
(Also read: Ecopetrol: Chairman of the Board does not rule out selling fracking business in the US.)
However, Saúl Kattan assured that this evaluation would not be done this year and that, for now, these operations will continue. In addition, he recognized that «it is interesting and profitable.»
Ecopetrol entered the Permian basin in the United States in 2019, hand in hand with its partner Oxy, and in just three years, it became his most profitable business. In the first nine months of 2022 earnings of 936,000 million pesos.
The oil company has a 49 percent stake in this business, which for the third quarter of last year lost an Ebitda margin of 88 percent.
Investors may view a sale as detracting from the company’s future growth prospects.
But the fact that reviewing the possibility of a sale is being considered is beginning to generate uneasiness in the market, since this operation could affect the profitability obtained by the company’s shareholders.
According to Daniel Velandia, director of Economic Research at Credicorp Capital, investors could consider that a sale would detract from future growth prospects of the company, but at the same time, a transaction with incremental benefit could be welcomed.
Also, given the Government’s commitment not to allow fracking in Colombia, it would make fewer synergies available to sustain this investment than before. «PIt seems that a decision will not be made in this regard in the short term.but we would expect investors to closely monitor this potential catalyst in the coming quarters,” added Velandia.
Meanwhile, the financial analyst Andrés Moreno Jaramillo, assured that, «unfortunately, the political issue goes above the economic one and of the shareholders, because the ideological theme ends up destroying the companies, the countries and the society. That is a reality and it happened in Venezuela.»
Additionally, he stated that These types of decisions do not help ecopetrol’s financial stabilitybecause fracking is the company’s most profitable business and because the United States is a great trading partner of Colombia.
Andrés Moreno commented that the changes that are made with the start of a new government in public and listed companies, such as Ecopetrol, can «destroy the company. What could be salvation for the politician ends up being a curse, as it happened with PDVSA».
The sale of this fracking business could also have a significant effect on Ecopetrol’s earningsin addition to not fulfilling the purpose of maximizing profits for its shareholders, which includes more than 250,000 Colombians.
(Also read: Ecopetrol: Colombia will need oil royalties and taxes)
Although it is a profitable operation, it does not have major effects on the viability or on the long term in Ecopetrol
Regarding the effects on production figures, the president of the Xua Energy Foundation, César Vera, assured that they will not be significant due to the barrels that are being produceddespite the fact that it is a very profitable operation.
According to Ecopetrol, in the third quarter of 2022, the company reached production of 43,700 barrels of oil equivalent per day (boed), which represented 6 percent of total production for this period (720,400 boed).
“Although it is a profitable operation, it does not have great effects on the viability or on the long term in Ecopetrol. To the extent that production grows and has a greater participation, greater effects could be had, ”he added.
In addition, the president of the Xua Energy Foundation stated that, although profitability could be lowered a bit, due to its weight in the total data, it would not have great effects. «It’s important for the company and it’s very profitable, but it won’t make a difference«, said.
If in the future Ecopetrol’s board of directors makes the decision to sell its stake in this business, Vera is sure that the important thing is to find a business that generates benefits similar to those of the Permian, it could be replaced.
In Colombia, operations of secondary and enhanced recovery in the Llanos and natural gas in the Piedmonte Llanero could give equal or higher returns, «if they are well managed.»
