FINANCIAL AND OPERATIONAL RESULTS 1Q-2016 May 2016 Cautionary - - PowerPoint PPT Presentation

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FINANCIAL AND OPERATIONAL RESULTS 1Q-2016 May 2016 Cautionary - - PowerPoint PPT Presentation

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CORPORATE GROUP FINANCIAL AND OPERATIONAL RESULTS 1Q-2016 May 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

May 2016 1Q-2016

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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 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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María Catalina Escobar Head of Corporate Finance and Investor Relations Thomas Rueda CEO Cenit Rafael Guzman Technical VP Maria Fernanda Suarez VP of Strategy and Finance Juan Carlos Echeverry CEO Hector Manosalva VP of Development and Production Max Torres VP of Exploration Juan Pablo Ospina VP of Commerce and Marketing MANAGEMENT PARTICIPANTS Felipe Bayón Executive VP Alberto Vargas Financial Comptroller Adolfo Tomas Hernández VP of Refining and Industrial Processes

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Agenda

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Market Overview 1Q 2016 Highlights Operational Results Financial Results 2016 Perspectives Q&A

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SLIDE 5 5

Ecopetrol Group generated a net income despite facing the lowest crude prices in 12 years

28.8 36.6 27.9

20 40 60 80 100 120 140 160 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

BRENT PRICE

(USD)

Fuente: Bloomberg
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2,469 3,059 3,249

$ 0 $ 500 $ 1,000 $ 1,500 $ 2,000 $ 2,500 $ 3,000 $ 3,500 1Q-2015 4Q-2015 1Q-2016

COP/USD Average

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The Colombian Peso devaluation had a positive effect

  • n revenues

55 45 35 44 34 25 USD 0 USD 10 USD 20 USD 30 USD 40 USD 50 USD 60 1Q-2015 4Q-2015 1Q-2016

Crude Prices

BRENT ECP Basket * Rounded Figures

La tasa de cierre se revaluó xx% lo que fue positivo para resultado neto

At the end of 1Q 2016 the exchange rate appreciated 4% vs. 2015 year end, resulting in a positive effect on our net financial result (non-operational)

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  • Positive results reflected in :
  • 127% increase in the net income between 1Q 2015 vs. 1Q 2016, despite a

43% decrease on our crude oil basket prices and a 24% fall in B/meja refining margins.

  • Group’s EBITDA of COP$ 4.1 Tn and 39.5% EBITDA margin
  • Focus on Cash Flow

 No dividend distribution  ~38% 2016 CAPEX reduction (USD$3 - $3.4 Bn vs USD$4.8 Bn)  Divestments: ISA for COP$ 377 billion  1Q 2016 Group’s savings of COP$0.42 Tn. The target for the full year 2016 is COP$1.6 Tn.

  • Financing for USD$ 475 million

1Q 2016: positive results under complex market conditions

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Transportation and Refining

Capital discipline

2016 CAPEX adjustment to navigate current market conditions

Segment % UP 90% DOWN 7% MID 3%

CAPEX 2017 - 2020

Production Investments on main production fields: Expected production of ~ 715 mbpd Conclude transportation projects and complete Reficar’s and Bioenergy’s start-up Exploration Ratification of 2015 exploratory discoveries and new projects on- shore Colombia and GOM-US

282 1,116 433 1,135 34

2016 CAPEX

Other Refining Midstream Production Exploration

3,000 -3,400

USD$ millions

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Cost efficiencies

Savings of COP$ 0.42 Tn for 1Q 2016 and main 2016 iniciatives

Figures are rounded and subject to further reallocation 9

1Q 2016 achieved savings 2016 savings initiatives* 560 290 220 210 160 160 2016 Savings

Consulting, Trucks, Energy Inventories Optimization Association Contracts Maintenance Labor Costs Supply

1,600 Fixed Costs 332 Variable Costs 17 Operational Expenses 72 Total Savings 421

COP$Billion COP$ Billion
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Reduction in Direct and Indirect Personnel

Cost efficiencies

Ecopetrol’s total personnel, including outsourcing, decreased from 53,543 in December/2014 to 27,954 in March/2016. A 48% reduction

9,150 8,731 8,688 44,393 30,319 19,266 2014 2015 1Q 2016 Direct Personnel Outsourcing 53,543 39,050 27,954

  • 48%

# of personnel

* Figures correspond to period end

Personnel*

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722 690

51 47

773 737

I trim. 15 I trim. 16

Ecopetrol S.A Participaciones netas

  • Investment adjustments
  • Natural decline
  • Judicial decisions (Hocol)
  • Temporary suspension of

fields with negative margins

Corporate Group’s Production*

11

mbpd

Production

Investment focused in mitigating negative impact on production

*Graph with rounded figures. Variations were computed with whole numbers

Production due to: Production in line with 2016 goal: 715 mbpd

  • 4.8%

1Q 2015 1Q 2016

Subsidiaries

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Production

Structural efficiencies

*Lifting Cost Ecopetrol Group – (Production without royalties). 1T 2016 Lifting Cost is affected downwards due to postponed activities caused by seasonality of the first quarter **LTM: Last twelve trailing months (April/2015 - March/2016)

Lifting Cost*

USD/bl

Fields maintenance: Efficiencies achieved in 1Q2016 vs 1Q2015:

  • 23% in wells intervention cost
  • 7% in number of interventions
  • 8% in intervention times

Dilution and Transportation Cost: Entry in operation of transportation systems with higher viscosity (405 cSt)

Record 2016

Drilling Days

Average Drilling Days

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Producción: 128 Kbpd Producción: 78 Kbpd

7.4 4.8 6.7

2015 1Q 2016 LTM**

  • 9.5%
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SLIDE 13 GoM ON-SHORE COLOMBIA
  • WELL PAYERO-1 BEING
DRILLED
  • CARDON SEISMIC
PROGRAM : 228 KM OF SEISMIC 2D NISCOTA- PAYERO-1 ECOPETROL AMÉRICA
  • LEON 2 APPRAISAL WELL
COMPLETED
  • DRILL IN 2016 WARRIOR WELL
– OPERATOR ANADARKO

Brazil North America

Exploration

Exploration activities in Colombia and abroad

ECOPETROL BRAZIL ACQUIRED 832KM2 OF SEISMIC 3D IN BLOCK POT-M-567 CARDON 13 OFF-SHORE COLOMBIA
  • DRILL IN 2016 APPRAISAL
WELL KRONOS-2 KRONOS-2
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670 903

1Q 2015 1Q 2016

1,021 952

253 264

1Q 2015 1Q 2016 Products Crude

Midstream

Consistent cash flow generation for the Group

* Transported volumes correspond to the Group’s companies and third parties. Percentages computed with whole numbers

Transported Volumes*(mbpd) Midstream’s Net Income (COP$Bn)

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1,216 1,274

Lower crude volume due to (i) attacks and illicit valves in Caño Limón– Coveñas and Transandino and (ii) Lower country production volumes Higher revenues and net income driven by (i) the exchange rate (tariffs set it US dollars) and (ii) operative efficiencies.

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  • March average load: 124.6 MBD
  • 28 out of 34 production units in operation.
  • First coke export embark took place in April

(51 thousand Tons)

Refining

Progress in Reficar’s start-up process

*Highest load reached on March 17, 2016 **Figures of the Corporate Group. B/meja refinery and Essentia (former Propilco) are included.

18.6 14.1

1Q -2015 1Q- 2016

Gross refining margin in B/meja (USD/Bl)

4.7 3.5

1Q -2015 1Q - 2016

Operating cash cost ($USD/Bl)**

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Record load 140 MBD*

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Financial results

Net income increased by 127% between 1Q 2015 and 1Q 2016

(COP$Bn) 16 * Variations were computed with whole numbers

127%

160 363

1Q -2015 1Q - 2016

Net Income

Costs and Expenses 8.9 9.9 -11%

1Q 2016 1Q 2015

(COP$Tn)

Revenues

10.5 12.3 -15%

Gross Margin 29% 30%

39.5% 38.9% EBITDA Margin

EBITDA 4.1 4.8

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Net Income Variation 1Q 2015 vs. 1Q 2016

(COP$Bn)

Group´s net income

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160 363 1,966 844 265 405 28 353 52 179 3,961

51

1,799 1T 2015 Efecto Volumen Efecto Precio TRM Compras Menores Costos Gastos Oper Dif cambio

  • Int. y otros

MPP Renta Interes no controlado 1T 2016

REVENUES COP$-1,816 BN COST OF SALES COP$1,109 MM EXPENSES COP$-51 FINANCIAL RESULT COP$ 1,394 1Q 2015 Volume Effect Price Effect FX Effect Purchases Lower Costs Operative Expenses FX Loss /Gain Interest and Other Equity Method Income Tax Non- controlling Interests 1Q 2016
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Income by segment

(COP$Bn)

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Income Variation by Segment 1Q 2015 vs. 1Q 2016

1Q 2015 E&P Downstream Midstream Eliminations 1Q 2016 EBITDA Margin

1Q 2016 17.3% 11% 79.9%

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Cash flow

Strong Cash Position

(COL$mm)

Cash Flow 1Q 2016

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6,550 7,636 ,1,315 1,058

596 458

3,725 788

Caja Inicial Operación Inversión Pago dividendos Aumento neto deuda Pago intereses deuda Efecto variación TRM Caja Final

Initial Final 1Q 2016 Operations Investments Dividend Net Increase Debt Interest FX Effect 1Q 2016 Payments in Debt Payments
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2016 Perspectives

A transition year for the Group

  • Completion of Reficar and load of 150-165 MBD
  • Concession reversal: Rubiales (June 30/16) and Cusiana (July 3/16)
  • Completion of Bioenergy by December 2016
  • Expected savings in 2016 of COP$1.6 Tn

 Dilution cost savings due to viscosity increase of up to 405 centistokes in the transportation systems.

  • Ensure efficencies obtained, even under better price scenarios.
  • Positioning for the future: Financial and operational excellence and

take advantage of E&P opportunities.

  • Update Business Plan 2016-2020 : 2H 2016
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Q&A

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