Decrease oil costs might sink Ecopetrol’s full-year income by $2.8 billion, president warns

By Nelson Bocanegra

BOGOTA (Reuters) – Decrease oil costs might cut back Colombian state-run oil agency Ecopetrol’s income by as much as 12 trillion pesos ($2.76 billion) this 12 months, the corporate’s president warned on Friday.

Ecopetrol may additionally must scrap manufacturing at some fields and deal with these with decrease prices, president Ricardo Roa instructed journalists on the sidelines of an business occasion.

Crude oil costs have been headed for his or her second-consecutive weekly loss on Friday, with Brent futures at $63.45 a barrel, on issues of an intensifying commerce battle between the US and China.

“We have already got a primary record of fields which have a break-even level near that worth, so we’ll must eradicate them and deal with these with decrease prices,” Roa stated.

Roa added that round 20 to 30 fields may very well be prone to closure. Ecopetrol operates 158 fields, though the chief cautioned that the fields on the chopping block weren’t main producers.

It was unclear how a lot of a manufacturing hit their closure might characterize.

“As the worth of oil drops, the corporate might want to monitor that quantity and make choices relating to eventual closures of different fields which may not be worthwhile,” Roa stated.

Past the hit to manufacturing, the decrease crude costs translate into an enormous hit for Ecopetrol’s income, he added.

Every greenback distinction on the worldwide market means a 900-billion-peso hit to EBITDA (earnings earlier than curiosity, taxes, depreciation and amortization) and a 700-billion-peso hit to web revenue, Roa added.

“If we have been contemplating (oil costs at) $73 a barrel and now they’re at $63, then we’ve got a distinction of 12 trillion pesos in worth.”

Ecopetrol’s income are key to Colombia’s financial system, which is going through growing fiscal strain as tax revenues slip, forcing the federal government to spice up its debt and lower spending.

NATURAL GAS BOOST

Individually on Friday, Ecopetrol introduced it will launch two new pure gasoline sale processes this 12 months.

Beginning in June, the state-run agency will promote extra pure gasoline produced domestically, whereas in July it’ll begin gross sales on gasoline imported by the Buenaventura port.

Pure gasoline from an offshore block collectively operated with Brazilian state-run producer Petrobras ought to come in the marketplace on the finish of this 12 months, with the potential to fulfill round 14% of Colombia’s present demand for the power supply.

(Reporting by Nelson Bocanegra and Carlos Vargas; Writing by Rafael Escalera Montoto; Enhancing by Chizu Nomiyama)