Ecopetrol trims spending, oil price assumption

OREANDA-NEWS. October 03, 2016. Colombia's state-controlled Ecopetrol trimmed 2017-20 annual capital expenditures by almost 19pc, targeting a modest 6pc increase in production based on a \\$50/bl oil price.

For the four-year period, Ecopetrol plans to spend \\$13bn, or an average of \\$3.25bn/yr, assuming a \\$50/bl oil price. Spending would kick up to \\$17bn, or \\$4.25bn/yr, if the price rises to \\$70/bl, according to a revised business plan released yesterday.

In a May 2015 investor presentation, Ecopetrol said it planned to spend \\$4bn/yr through 2020, at \\$60-80/bl.

Production and development account for 75pc of the new 2017-20 investment, followed by 15pc for exploration and 10pc for midstream and refining.

Last year, the company's capital expenditures totaled \\$6.5bn.

Ecopetrol allocated 47pc of capex to production and development, 41pc to midstream and downstream, and 12pc to exploration during 2014-2015. This year, the company plans to spend \\$3bn-\\$3.4bn.

By 2020, assuming an average price of \\$50/bl, estimated production should reach 760,000 b/d of oil equivalent (boe/d), up 6pc from current output, Ecopetrol said.

Under the \\$50/bl price scenario, Ecopetrol plans a basic portfolio of 340,000 boe/d, plus 314,000 boe/d from infill development drilling, 39,000 boe/d from secondary recovery, 18,000 boe/d from tertiary recovery and 49,000 boe/d from new production yields from exploration.

If oil prices rise to around \\$70/bl, Ecopetrol says it could add another 70,000 boe/d to reach 830,000 boe/d in 2020.

Around 94pc of the company's projected 2020 output would come from currently producing fields.

In the mid-term, Ecopetrol plans to achieve its production targets by development drilling at mature fields in the Llanos and Middle Magdalena Valley basins.

Through 2020, the company will spend around \\$1.4bn on development drilling at Rubiales, \\$790mn at Castilla, \\$370mn at Quifa, which is operated by Pacific Exploration and Production, \\$470mn at Ca?o Sur, \\$460mn at La Cira Infantas field and another \\$2.85bn on a series of other fields including Chichimene.

The company started 2016 with around 1.85bn bl of proven reserves. After expected production of 1.14bn and incorporation of 594mn new reserves, Ecopetrol plans to arrive at 2020 with 1.3bn bl.

In the long term, Ecopetrol hopes to bulk up reserves from offshore Gulf of Mexico and Colombian Caribbean assets, and is looking to opportunities in Mexico, Ecuador, Brazil, Argentina and Venezuela.

The upstream tilt follows the company's completion of the \\$8bn 165,000 b/d Cartagena refinery this year.

Downstream, Ecopetrol is focusing on building efficiencies and cutting costs, while midstream the firm plans to spend \\$155mn/yr on maintenance.