Colombia State Oil CEO Says $3.6 Billion Stake Sale Is Not Needed

(Bloomberg) -- The head of Colombia’s state oil company Ecopetrol said he doesn’t see the need for the government to sell another stake in the company -- an idea the finance minister supports.

The ministry is weighing the sale of an 8.5 percent stake in Ecopetrol, worth about $3.6 billion. CEO Felipe Bayon said such a sale could take as long as two years to complete, and said the company is generating value for the government, which currently owns 88.5 percent of it.

“I don’t think there’s a need right now to do the sale,” Bayon said Wednesday, in an interview in New York.

The government of President Ivan Duque is struggling to comply with tough fiscal deficit targets at the same time it deals with the costs of a migration crisis from neighboring Venezuela, as well as the expense of implementing programs from the 2016 peace accord with Marxist rebels. Selling part of Ecopetrol would help the government avoid cuts to public investment programs.

At a lunch with investors and analysts in New York last month, Duque said that he didn’t see the need to sell a stake in the company at this stage, according to Bayon. Finance Minister Alberto Carrasquilla said in an interview with Blu Radio in January that he would support the idea, and that he thought President Ivan Duque also backed it.

The head of Duque’s press office, Carlos Cortes, didn’t reply to an email seeking comment.

Pipeline Unit

Bayon also said he didn’t see the need for a spinoff of Ecopetrol’s pipeline unit, CENIT. The company will generate a lot of value if Colombia’s moves into unconventional production are successful, he said.

“We want to actually increase the volumes from 1.1 to 1.25 million barrels. Ebitda margins are very good, 75 to 80 percent,” he said. “This is a very good piece of the business. Why would you want to sell it?"

Bayon said there was no political pressure on the company to issue a special dividend this year, which was taken due to the company’s strong financial position. The government is “extremely respectful” in its dealings with the company, and didn’t ask the company to take on debt to keep dividends up in 2015, he added.

Ecopetrol is planning to invest between $12 billion and $15 billion in the next three years to boost production, including $500 million for fracking, which is contingent on the government approving licensing.

To contact the reporters on this story: Matthew Bristow in Bogota at mbristow5@bloomberg.net;Tina Davis in New York at tinadavis@bloomberg.net;Simon Casey in New York at scasey4@bloomberg.net

To contact the editors responsible for this story: Matthew Bristow at mbristow5@bloomberg.net, Carlos Caminada

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