Hot stock to watch: Ecopetrol SA (NYSE: EC)

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Ecopetrol SA (NYSE: EC) stock rose over 1.5% on 13th August, 2019 (as of 11:22 am GMT-4; Source: Google finance) after the company in the second quarter of FY 19 has reported the 0.9% fall in the net profit to 3.48 trillion pesos ($1.03 billion) from the year-ago quarter on lower prices for its products. However, the net profit in the first half rose 1.6% compared with the first half of 2018 to 6.23 trillion pesos. Earnings before interest, taxes, depreciation and amortization fell 3.5% in the quarter which ended in June from the same period in 2018, to 8.3 trillion pesos.

Crude production rose in the first half to 726,000 barrels per day (bpd), Ecopetrol said, from 711,000 bpd in the first half of 2018. That met its 2019 target output of between 720,000 and 730,000 bpd. The positive results of the drilling campaign in fields such as Akacias and Rubiales, and the solid performance of the recovery program, which contributed 30% of production in the semester, partially mitigated the impact of the scheduled maintenances at the Oripaya, Cusiana and Cupiagua fields.

Sales volumes totaled 913,000 barrels-equivalent per day, increasing 4.2% compared with the first half of 2018, primarily driven by higher crude exports, and refined products from the Cartagena refinery.

Ecopetrol plans to invest $3.5 billion to $4 billion in 2019, more than the previous year, as part of an ambitious plan to boost production and exploration to replenish dwindling oil reserves. Some 80% of the investment will be focused on upstream projects, mostly in Colombia, Ecopetrol has said, while another portion will be spent in the United States, Brazil and Mexico. Ecopetrol’s efforts to invest some $500 million in exploration of unconventional deposits hit a snag last month when Colombia’s environmental authority suspended its evaluation of the company’s request to start a fracking pilot project until an administrative court reinstates rules for tapping unconventional deposits.

Meanwhile, in the international expansion front, there were two very important events. The first one is the approval by the Brazilian Ministry of Mines and Energy of Ecopetrol’s 10% stake in the Saturno block, located in the central region of the Santos Basin in the Brazilian Pre-salt; and second, the company’ss entry into the Midland in the Permian basin, the area with the fastest growth and highest yield in the United States, to participate in exploiting non-conventional reservoirs. This is transformational news for Ecopetrol and the country.

The company is plagued by the regular bombing, attributed to leftist rebels, of various of its pipelines. The most recent attack took place over the weekend.

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