FINANCIAL AND OPERATIONAL RESULTS August 2016 2Q 2016 Cautionary - - PowerPoint PPT Presentation

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FINANCIAL AND OPERATIONAL RESULTS August 2016 2Q 2016 Cautionary - - PowerPoint PPT Presentation

CORPORATE GROUP FINANCIAL AND OPERATIONAL RESULTS August 2016 2Q 2016 Cautionary Statement This document was prepared by Ecopetrol S.A. with the purpose of providing the market and interested parties certain financial and other information of


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CORPORATE GROUP

FINANCIAL AND OPERATIONAL RESULTS

August 2016 2Q 2016
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SLIDE 2

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’s Business. Said projections and statements include references to estimates or expectations of the company regarding its future and operational results. Potential investors and the market in general should be aware that the information provided herein does not constitute any guarantee of its performance, risks or uncertainties that may occur or materialize. Real results, may fluctuate and differ from those provided herein due to several factors outside of the control of the Company. Neither Ecopetrol nor its advisors, officers, employees, directors or agents, make any representation nor shall assume any responsibility in the event actual performance of the Company differs from what is provided herein. Moreover, Ecopetrol, its advisors officers, employees, directors or agents shall not have any obligation whatsoever to update, correct amend or adjust this presentation based on the information attained or events occurred after its disclosure. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Ecopetrol. Neither this presentation nor any of its contents may be used for any other purposes without the prior written consent of Ecopetrol.

Cautionary Statement

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SLIDE 3

Lina María Contreras Head of Corporate Finance and Investor Relations (A) Thomas Rueda CEO Cenit Rafael Guzmán Technical VP María Fernanda Suárez CFO Juan Carlos Echeverry CEO Max Torres VP of Exploration MANAGEMENT PARTICIPANTS Felipe Bayón COO Carlos Alberto Vargas Chief Transformation Officer Juan Pablo Ospina VP of Commerce and Marketing Adolfo Tomas Hernández VP of Refining and Industrial Processes Hector Manosalva VP of Development and Production

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SLIDE 4

Min 27.9

20 30 40 50 60 70 80

ene mar may jul sep nov Brent Price (USD/BL)

2015 2016

4

We proved the ability to reinvent ourselves in a

challenging environment

Source: Bloomberg

Average 1H2016: 41.2 Average 2015: 53.7

20-Jan-2016

“El Niño” Weather phenomenon Closure of the border between Colombia and Venezuela Attacks to transportation infrastructure Local Environment International Environment

Jan Mar May Jul Sep Nov

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SLIDE 5

We reinvented ourselves to be sustainable

and competitive

  • Management team renewal
  • New organizational structure
  • Value over volume

New Leadership Financial Strength

  • Financial Discipline
  • No dividend payment
  • Divestments
  • Funding diversification

Transformation Plan

  • Structural savings (e.g. Dilution)
  • Operational efficiency
  • Enhanced Recovery
  • Renewal of exploratory model

Procurement

  • New procurement model
  • Contractors staff reduction

Projects

  • Project management standardization
  • Secure our projects value
  • New Engineering and Projects Vice-

presidency

Relations with Environment

  • New relationship model
  • Emphasis on environmental sustainability

Structural changes that support positive results

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SLIDE 6

In 2Q 2016 we obtained strong results

Net Income 2Q 2016 COP$787 Bn 1H 2016 COL$ 1,150 Bn Divestments of COP$725 Bn

Positive Financial Results

Reversion of Rubiales and Cusiana fields Reficar: Successful startup process Additional savings in 1H 2016 of COP$0.8 Tn

Operational Results Higher efficiency and lower costs

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SLIDE 7 COP Billions

Transformation Plan - Cost Evolution (P&L)

2014 2015 PY 2016 BCOP Energía Generales Materiales Carrotanques Mantenimiento Asociadas Contratos Energy Generals Materials Trucks Maintenance Associated Contracts COP Trillion

Efficiency targets in Opex , Capex and Revenues Transformation Plan - Cost Savings (P&L)

1.0 2.4 3.1 3.5 3.9 4.5 2.2 2.8 2015 2016 2017 2018 2019 2020 Metas de ahorro iniciales Real 2015 & Real a Jun 2016 +114% Initial saving targets 2015 real & 1H 2016 real 9.1 7.1 6.1

We gained structural operational efficiencies through

  • ur transformation plan
COP$ Tn 7 2015 1H 2016 PY 2016

2.0

Tn COP

2.8

Tn COP

3.0

Tn COP Structural Non Structural
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SLIDE 8

We do things differently, obtaining efficiencies in our

  • perational key metrics

UPSTREAM MIDSTREAM DOWNSTREAM

  • 3%
  • 8%
  • 11%
  • 9%
  • 9%
  • 19%
  • 12%
  • 30%
  • 20%
  • 10%
0% Costo de Transporte (COP/bl) Costo de Dilución de Crudo (COP/bl) Costo de Energía (COP/kWhr) Costo Tratamiento Fluido (COP/boe) Fluid treatment cost (COP/boe) Energy cost (COP/KWhr) Crude oil dilution cost (COP/bl) Transportation cost (COP/bl)

Opex

  • 20%
  • 9%
  • 40%
  • 30%
  • 20%
  • 10%
0% Costo de Perforación (USD/PP) Drilling cost (COP/per foot drilled)
  • 3%
  • 9%
  • 20%
  • 10%
0% Costo de Mantenimiento Transporte (COP/bl) Transportation maintenance cost (COP/bl)

Opex

  • 38%
  • 13%
  • 60%
  • 40%
  • 20%
0% Costo Mantenimiento de Refinación (COP/bl) Refining maintenance cost (COP/bl)
  • 23%
  • 57%
  • 100% -75%
  • 50%
  • 25%
0% Costo Gestión Contratos (COP/boe) Contract management cost (COP/boe)

ECOPETROL S.A. Contracted Services

2015 vs 2014 1H 2016 vs 2015 Normalize efficiencies to crude oil prices, diluent prices and exchange rate (USD/COP)

Capex Opex

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SLIDE 9
  • 5.7

12.1 1.8 2014 2015 2016

Viscosity: 200 cSt 300 cSt 405 cSt

600 cSt

Years

Dilution Costs in heavy and extra heavy crude as structural

reduction example

Optimization Emphasis

Dilution factor decrease

(% diluent / Normalized heavy crude volume) 20.0% 18.5% 16.8% 2014 2015 Jun-2016 Decrease of 210 trucks per day and 608,000 Km/year Take advantage of the increase in capacity of Pozos- Galán pipeline Codilution Increase of cSt Ahorro Diluyente KBD Dilution Optimization Strategies 9

Dilution total savings

Real efficiency Dec of 2016 Forecast 394 332 726 177 177 509 903 2015 2016 Acumulado

COP Bn

Accumulate Diluent Savings MBD
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SLIDE 10

Main fields drilling reactivation in 2016

Production

New landmark as world-class operators +500 mboed Rubiales field reversion

  • Additional production ECP as of July: +53 mboed
  • Active wells: 527
  • Recovery factor: 9.4%*
  • Castilla: 35 wells
  • Rubiales: 35 wells
  • La Cira Infantas: 24 wells
10 * As of June 30, 2016
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SLIDE 11

I Sem 2014 I Sem 2015 I Sem 2016 Average Cost (USD/ interventions) 1H 2014 1H 2015 1H 2016

11

Production

Improvement in our processes generates consistent results

Lifting Cost USD/bl Wells Interventions

34 36 26 26 19 21

Castilla Chichimene 2014 2015 2016

Drilling Days

2016 record: 12 days 2016 record: 18 days

7.4 4.8 5.4 6.1

1 2 3 4 5 6 7 8 2015 1T 2016 2T 2016 U12M

2015 1Q 2016* 2Q 2016* LTM**

  • 18%
  • 44%
  • 42%
  • 31%
* Q1 and Q2 lifting cost has low seasonality ** LTM: Last twelve months, July 2015 to June 2016

1

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SLIDE 12 GoM

ONSHORE COLOMBIA (2Q)

  • DRILLING “PAYERO-1” WELL
  • BEGINNING OF THE
CARDON SEISMIC PROGRAM WITH A TARGET OF 228 Km 2D SEISMIC NISCOTA- PAYERO-1

ECOPETROL AMERICA

  • 2Q: APPRAISAL WELL
‘LEON 2’ UNDER EVALUATION
  • 3Q: DRILLING
“WARRIOR” WELL (OPERATOR: ANADARKO)

Brazil North America

Exploration

Pursuing high-value and quality prospects

ECOPETROL BRASIL

2Q: PROCESSING 854 Km2 OF 3D SEISMIC POT-M-567 BLOCK CARDON 12

OFFSHORE COLOMBIA

4Q: BEGINNING DRILLING OF “PURPLE ANGEL-1” WELL PURPLE ANGEL-1

REASSESSMENT OF MATURE FIELDS INTEGRATING EXPLORATION AND PRODUCTION TEAMS

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SLIDE 13

979 952 869 250 264 258

200 400 600 800 1000 1200 1400

2T 2015 1T 2016 2T 2016

Refinados Crudo

2Q 2015 1Q 2016 2Q 2016

Refined Products Crude

Transportation

Cash flow generation remains through this segment

*Transported volumes correspond to the ECP group and third parties: Percentages were calculated with complete numbers

Transported Volumes *(kbod)

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Higher income versus 2Q 2015 despite a lower transported volume leveraged by:

  • Optimization in costs and expenses
  • Foreign exchange rate

630 903 779

100 200 300 400 500 600 700 800 900 1000

2T 2015 1T 2016 2T 2016

2Q 2015 1Q 2016 2Q 2016

Net Income COP$Bn

  • 8.4%

24%

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SLIDE 14

Refining Completion of Reficar's start up

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  • The start up of the 34 units of the modernization project was completed in July
  • Begin of the stabilization stage and performance tests:
  • Design capacities test
  • Performance and operational limit verification
  • Economic benefit maximization

Start up Jul/2016 Stabilization 2H 2016 Optimal Operation 2017

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SLIDE 15

Refining

Persistent efforts on segment´s efficiency

*Figures correspond to ECP Group. Include the operation of B/meja refinery and Essentia (Propilco). Percentages computed without rounded figures 15

Gross Refining Margin in B/meja (USD$/Bl)

17.2 14.1 13.5

2T 2015 1T 2016 2T 2016 2Q 2015 1Q 2016 2Q 2016

4.6 3.5 4.3

2T 2015 1T 2016 2T 2016 2Q 2015 1Q 2016 2Q 2016

Cash Operating Cost ($USD/Bl)*

  • 21%
  • 5%
  • Lower price differential between the international products and crude oil vs. 2Q 2015
  • When compared with 1Q 2016, refining margin is impacted by the lower price differential between the

fuel oil and crude oil

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SLIDE 16

Operational Income

COP$ Tn

3.55 1.60 2.48

2Q 2015 1Q 2016 2Q 2016 55%

Net Income

COP$ Tn

EBITDA

COP$ Tn

1.51 0.36 0.79

2Q 2015 1Q 2016 2Q 2106

5.52 4.14 4.52

2Q 2015 1Q 2016 2Q 2016

Financial Results

Reflecting operational strength

16

117% 9%

38.5% % EBITDA Margin 39.4% 39.5% Percentages computed without rounded figures
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SLIDE 17

Public Offering

2Q 2016

Data Room Access

2Q 2016

Auction

4Q 2016

Assets Transfer

2Q 2017

Council of Ministers

2Q 2016

Release of Decree

3Q 2016

First Stage

4Q 2016

Second Stage

2017

377

ISA EEB

348

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Successful Divestments in 2Q 2016 for

COP$725 Bn

2Q 2016 Divestments (COP$ Bn)

Divestments proceeds are not included in our Cash Flow planning

Divestment in Minor Fields
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SLIDE 18

Cash Flow

Strong cash flow generation

COP$ Bn

Cash Flow 2Q 2016

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  • Including the self-withholding taxes, income taxes, and wealth tax that apply to the companies in the group.

7,636 7,918

4,117 725 932 (3,344) (955) (1,002) (191)

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

Caja inicial 2T 2016 Flujo Operación antes de impuestos Pago de impuestos* Inversion CAPEX Desiversiones Inversión portafolio títulos y otros Financiación Efecto variación TRM NETO Initial 2Q2016 Operating Cash Flow before Taxes Tax payment* CAPEX Divestments Portfolio and
  • ther
investments Financing FX effect Final 2Q 2016
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SLIDE 19

2H 2016 Outlook

19 TD: Total Depth

Operational and Financial Excellence Business Plan 2017-2020 Update Beginning drilling ‘Warrior’ (US GoM, reaches its TD in 2016), ‘Purple Angel’ (appraisal of Kronos) and 3

  • nshore wells (‘Bullerengue’, ‘Lorito’, ‘Pegaso’)

Results of appraisal well ‘LEON 2’ and exploratory well ‘Payero’ Since July 19th ‘Gunflint’ reached 20 mboed (Ecopetrol interest of 31.5%)

Closing a year of transition

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SLIDE 20

Q&A

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