Ecopetrol announced today the Ecopetrol Group's financial results for the second quarter and the first half of 2020 and the update of the Business Plan 2020-2022. 

In the first half of 2020 Ecopetrol Group's average production closed at 706 mboed, 19 mboed less than first semester of 2019, mainly explained by the current situation, as well as by public order events and blockages in the Rubiales and Suroriente fields. These impacts were partly offset by higher sales of white products from the LPG Plant in Cupiagua, and the operations reversal in the Pauto and Floreña fields.

The gas business made a significant contribution to the country's energy safety, whose hydric reserves reached critical levels during May and June. Transitional regulation allowed gas to replace hydro generation, compensating for the impact on the Group's demand as a result of the health emergency.

Regarding Non-conventionals, the Ministry of Mines and Energy published the technical regulation on July 7th, and we expect that the environmental, civil and contractual regulation will be published released in the coming months, completing the regulatory framework for the development of the Comprehensive Research Pilot Projects (PPII). The activity planned in the Mid-Magdalena Valley remains within the new 2020-2022 Plan, with an investment of around USD 127 million, and we recently announced a preliminary agreement with ExxonMobil to jointly work on these pilots.

Permian operations
During the second half of 2020, activities will mainly focus on the drilling of 22 new wells, additional to the 22 already producing, and that will be completed and begin production in the first quarter of 2021. The company estimate an average net production for the Ecopetrol Group of ~5.5 mboed in 2020, higher than the 4 - 5 mboed announced in the first quarter of the year. In addition to the economic rationale, this reactivation allows Ecopetrol to continue with the knowledge transfer and confirms the competitiveness of the position and the alignment with their strategic partner.

Midstream
In the midstream segment, transported volume decreased 10% as compared to the first half of 2019, impacted by lower domestic production, as well as lower consumption of crude by our refineries. Given the exceptional situation and, with the aim of mitigating permanent impacts on volumes, a temporary relief program was activated that resulted in total financing of USD 8.7 million and commercial tariffs discounts between 5.5% and 10%s, for April and May. Also, volume requirements were relaxed for some ship-or-pay contracts. No reversal cycles have been carried out this year, thanks to reduced maintenance times for the repair of the Caño Limón oil pipeline.

Downstream
The downstream segment performance was negatively impacted by the drop in demand associated to the lockdowns, as well as in the prices for major refined products worldwide. However, given the gradual recovery in demand, refineries have increased their throughput, reaching a combined throughput of 300 mbd and an integrated refined gross margin of 8.1 USD/Bl, compared to 364 mbd and 9.7 USD/Bl for the first half of 2019.

Felipe Bayón Pardo, CEO of Ecopetrol commented:
"In line with the guidance announced at the end of the first quarter, results for the second quarter reflect the impact of the unprecedented situation caused by the global spread of COVID-19. April reported the worst performance of crude prices since the beginning of the crisis. The inventory build-up and the contraction in demand as a result of the lockdown measures implemented worldwide led to a 38% decline in the Brent, compared to 2019 year- end, even with negative levels for WTI, and below USD 20 for Brent during some days. Likewise, during the second quarter, sales of our main products reported a decrease of 46%, mainly in jet fuel (-89%), gasoline (-46%) and diesel (-35%).

This new reality required a rapid financial and operational adjustment that we executed decisively, while reinforcing our three strategic pillars: strict capital discipline, cash protection and cost efficiency, as well as reserve growth and profitable production.

KeyFacts Energy: Ecopetrol Colombia country profile