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Colombia's Ecopetrol boost net income by 59%

BOGOTA, May 05, 2011

Ecopetrol SA (ECOPETL) , Colombia 's largest oil company, said surging exports and record production fueled a 59 percent jump in first-quarter profit.

Net income increased to 3.11 trillion pesos ($1.76 billion) from 1.95 trillion pesos a year earlier, the state-controlled company said yesterday in a statement after the market close. Revenue rose 41 percent to 14.4 trillion pesos as output climbed 17 percent to 686,200 barrels a day.

Revenue from exports jumped 67 percent to 9.27 trillion pesos from 5.54 trillion pesos, according to the statement.

Bogota-based Ecopetrol has embarked on an $80 billion plan to increase production to 1.3 million barrels per day in 2020 by tapping reserves in Colombia, the U.S. Gulf of Mexico , Peru and Brazil through exploration and asset purchases.

Ecopetrol “should be able to maintain the trend” of production increases, Samuel David Garcia, an analyst at Valores BanColombia SA, said May 2 in a telephone interview in Bogota. “They have the firepower to make new acquisitions.” He doesn't own shares in Ecopetrol and Valores doesn't rate the stock.

Net income surpassed his forecast of 2.6 trillion pesos and an estimate of 2.9 trillion pesos by analyst Mauricio Restrepo at brokerage Bolsa y Renta in Medellin.

First quarter operating income jumped 57 percent to 5.7 trillion pesos from 3.6 trillion pesos in the same period last year, according to the company's statement.

Ecopetrol's production rose from an average of 586,000 barrels per day in the year-earlier period. In all of 2010, Ecopetrol's average output was 615,900 barrels per day. The company aims to increase production to 1 million barrels a day by 2015.

Luring Billionaires

Government inroads against guerrilla groups have improved security, luring investors including billionaires Eike Batista and Carlos Slim , whose Grupo Carso SAB stepped into Colombian oil exploration this year.

Grupo Carso bought a stake in Geoprocesados SA's Tabasco Oil Co., which is exploring in eastern Colombia in an area where Ecopetrol taps crude reserves.

“Colombia is on investors' radar,” Natalia Agudelo, a Medellin-based analyst at Celfin Capital SA, said in a telephone interview May 2. “The risk of Colombia has decreased, though it hasn't been eliminated.”

Ecopetrol had to repair pipelines in eastern and southern Colombia this year because of sabotage. The attacks on the Trasandino and the Cano Limon Covenas pipelines didn't affect production, the company has said.

Military strikes against guerrilla groups has reduced offenses on pipelines, roadways and bridges to 76 in 2009 from more than 800 in 2002, according to government figures.

‘Closing In'

Colombia may produce 1.7 million barrels of crude and natural gas a day in 2020, “closing in” on Brazil , South America 's second-largest producer after Venezuela, Energy and Mines Minister Carlos Rodado said in an interview last month.

A venture formed by Ecopetrol and Talisman Energy Inc. after their $1.75 billion purchase of assets last quarter from BP Plc will begin exploratory drilling next year for natural gas offshore in the Caribbean. The venture, called Equion Energia Ltd., may begin production in 2016, Equion President Maria Victoria Riano said in an interview last month.

Petroleo Brasileiro SA, Brazil's state-controlled oil company, also is a partner in the blocks off the nation's northern coast.

Ecopetrol's investments in the first quarter including acquisitions more than doubled to $1.88 billion from $805 million, the company said.

Rising Production

The nation's production jumped to a monthly record of 903,000 barrels a day in April, according to the state-run National Hydrocarbons Agency .

Colombia's government said in March it will sell as much as 1.5 percent of Ecopetrol at year-end as part of a plan to ultimately divest up to 10 percent.

Ecopetrol rose 5 pesos to 3,800 pesos yesterday in Bogota trading. The stock has fallen 7.3 percent this year. Colombia's benchmark Colcap index had dropped 8.4 percent in the same period.

Crude for June delivery lost as much as 81 cents to $108.43 a barrel in electronic trading on the New York Mercantile Exchange . The contract was at $108.63 at 10:48 a.m. Sydney time.

Oil in New York settled at $113.93 a barrel on April 29, the highest since September 2008.

Story by Heather Walsh from Bloomberg News.

Bloomberg/ May 5, 2011


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