Ecopetrol Looking at Acquisitions ‘This Year’ to Boost Reserves
(Bloomberg) -- Colombia’s Ecopetrol SA plans to expand its oil and gas reserves through acquisitions, while also increasing its presence in the U.S.
The state-owned oil company has identified assets that it may consider buying, Chief Executive Officer Felipe Bayon said Friday in an interview at the New York Stock Exchange. "We’re trying to make it happen this year."
“It needs to be the right fit with the strategy and the right valuation,” Bayon said. “Mexico and Brazil are definitely two of the key places where we want to be, through exploration or through acquisitions.” The company is focused on expanding its presence in the U.S., possibly through joining forces with a partner, he said.
Analysts consider the level of oil reserves as a challenge for the Colombian driller. Crude is Colombia’s biggest export, yet the nation had reserves equivalent to just over five years of output at the end of last year. That compares to more than forty years for Ecuador and nearly four centuries for Venezuela, according to the BP statistical review.
Colombia is on course to miss the government’s target of 65 wells for the full year. Ecopetrol was operating 33 rigs at the end of the second quarter. The company plans to have 41 drilling rigs by the end of the year and at least keep that number next year.
Ecopetrol is considering an expansion of the 150,000 barrel-a-day Cartagena refinery to as much as 210,000 barrels, Bayon said. A final investment decision could come early next year after engineering studies are finished. Part of the expansion may come from bringing old units back online, he said.
Ecopetrol is considering hedging oil as a company independent of the Colombian government. Bayon said they haven’t ruled out hedging, even though it isn’t needed right now. To break even, in terms of earnings, Ecopetrol only needs oil prices to be around $35 a barrel, down from $65 a barrel needed four years ago, he said.
“Even though we have sort of an independent governance in terms of how the company is run, I’m sure it will create some political debate, in terms of the hedging itself.”
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