Ecopetrol SA (EC) Q2 2025 Earnings Call Highlights: Record Production and Strategic Advances ...

Release Date: August 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Ecopetrol SA (NYSE:EC) achieved a production level of 751,000 barrels of oil equivalent per day, the highest in a decade, driven by strong performance in Colombia and the Permian Basin in the U.S. The company declared the commercial viability of the Loreto discovery, marking the most significant find in the past 10 years. Ecopetrol SA (NYSE:EC) completed the first long-term commercialization of imported natural gas in Colombia, securing national supply through 5-year contracts. The company achieved efficiencies totaling 2.2 trillion Colombian pesos, exceeding the semester's target by 27%, helping to mitigate the impact of lower prices. Ecopetrol SA (NYSE:EC) made significant progress in its TESG agenda, with a reduction of 242,000 tons of CO2 equivalent and investments in renewable energy projects.

Negative Points

The decline in crude prices, with Brent falling by 22% compared to the second quarter of 2024, negatively impacted revenue and profits. Transported volumes in the midstream segment decreased by 6% compared to the second quarter of 2024 due to external events such as blockades and attacks on infrastructure. The downstream segment faced challenges with a 5% decrease in throughput on a semester basis due to increased maintenance activity and unexpected power outages. Ecopetrol SA (NYSE:EC) faced a one-time financial impact due to adjustments in Brazil's existing system basic network, reducing EBITDA by approximately 0.6 trillion pesos. The company is dealing with a potential claim related to value-added tax on gasoline and diesel imports, with estimated claims amounting to approximately 11 trillion pesos.

Q & A Highlights

Warning! GuruFocus has detected 6 Warning Sign with EC.

Q: Could you explain how you reached the peak production and your expectations for the rest of the year? Also, could you provide details on dividends and royalties? A: Juan Carlos Urtado, Acting VP of Hydrocarbons, explained that the peak production of 165,000 barrels per day was achieved through anticipation of activity and improved drill performance. The expectation for the end of the year is an average production of 90 to 190 barrels a day. Camilo Marco, CFO, added that the company transferred 40.4 billion pesos to the nation last year, with taxes representing 50% of these transfers. This year, they expect a similar proportion, with a total transfer of 35 to 40 billion pesos.

Q: Could you expand on the topic of asset disinvestment and whether it relates to President Petro's comments on selling U.S. assets? A: The Vice President of New Businesses clarified that the CEO discussed asset disinvestment in Colombia, and the company regularly evaluates its portfolio. They are looking at replicating positive experiences like Barracks and are evaluating assets in Colombia for potential disinvestment. Specific assets cannot be disclosed due to confidentiality.

Story Continues

Q: With the decrease in Brent prices and efficiency initiatives, what is the expected cash break-even for the upstream business? Also, what are the reasons for the minimum gas production in the past 10 years? A: Camilo Barco, CFO, stated that 99% of fields have break-evens below $50 per barrel. The group aims to maintain production and reserves, with a break-even of about $50 per barrel for net profit. Juan Carlos Urtado, Acting VP of Hydrocarbons, explained that natural decline and reduced gas consumption in processes contributed to lower production, but infrastructure development for imports and exports is underway.

Q: If oil prices drop to the break-even level, what would be management's plan regarding CapEx and dividends? A: Camilo Barco, CFO, emphasized preserving production and reserves. If prices fall below break-even, additional measures would be taken, focusing on efficiencies and CapEx flexibility. The dividend policy aims to remain within the 40-60% payout range, but adjustments could be considered if extreme situations arise.

Q: What are the expectations for the downstream segment in the second half of 2025? A: Felipe Bayon, CEO, mentioned that major overhauls were completed in the first half of the year, and no significant interventions are expected in the second half. The focus will be on improving operational reliability and addressing external risks related to light crude supply.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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