BOGOTA, Colombia, Feb. 16, 2016 /CNW/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC; TSX: ECP) reports that during 2015 the Corporate Group achieved its savings goals for a total of COP$2.8 trillion, of which COP$2.2 trillion corresponded to the parent company.
Given the challenging price environment observed since the beginning of 2016, Ecopetrol S.A. announces that it will seek to save an additional COP$1.6 trillion through the present year.
In order to accomplish this, the company has adopted a new series of savings and austerity measures aimed at optimizing cash flow and reducing costs of all of its processes. The measures will help mitigate the impact of the drop in international crude prices on production and reserves, allowing for the continued production of profitable barrels and the value creation for shareholders and Colombian citizens.
The new measures are:
- The freezing of the expense budget at 50% for all areas (OPEX).
- A freeze on personnel except for critical operational positions. The company will reorganize itself internally in order to take over the Rubiales and Cusiana fields, events that will take place during the year.
- The adoption of a new model of contract management. Technical and administrative management, previously handled through contractors, will be handled directly by Ecopetrol personnel, which will involve a reorganization of tasks and transfer of personnel between operational areas and sites.
- The budget for travel will be reduced to the minimum required to support the operation.
- The elimination of consulting and professional services that are not strictly necessary for the operation.
- It trimmed to one-third investment in advertising and sponsorships. This means moving from COP$ 9,000 million in 2015 to COP$3,350 million in 2016.
- A shock policy to ensure the efficient use of inventories. Material or parts purchases will only be authorized when nothing is available in Ecopetrol and affiliate warehouses.
- Giving priority to the carrying out of business by Group companies before any third party as long as they are carried out under conditions equal to or better than the market's.
- Implementation of the 2016 investment plan will depend on crude oil price evolution. Investments will be evaluated by means of a strict process of capital allocation and value creation and cash generation criteria.
- Proceeds from the divestment plan for non-strategic assets and share ownership are expected to be between US$400 million and US$900 million for the period 2016-2017. As the 2016 budget does not have uses for proceeds derived from this program, resources obtained will strengthen the company's cash flow.
- In exploration, investments will be redirected to onshore projects (continental territory) and will focus on recent deep water discoveries with strong potential (Kronos).
- In 2015, Ecopetrol obtained US$3,425 million in financing, while in 2016 the company has adjusted its financing needs to a range between US$1,500 million and US$1,900 million.
This strengthens financial metrics and seeks to preserve the company's investment grade rating. It is estimated that in the current environment, the debt/EBITDA ratio would fluctuate between 3.8 and 4 times in 2016 and gradually drop in the following years. These figures could vary depending on the price situation, changes in the investment plan and divestment program results.
Ecopetrol is the largest company in Colombia and is an integrated oil & gas company; it is among the top 50 oil companies in the world and among the four top ones in Latin America. Besides Colombia - where it generates over 60% of the national production - it has exploration and production activities in Brazil, Peru & the US (Gulf of Mexico). Ecopetrol owns the largest refinery in Colombia and most of the pipeline and multi-product pipeline network in the country, and is significantly increasing its participation in bio-fuels.
This release contains statements that may be considered forward looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. All forward-looking statements, whether made in this release or in future filings or press releases or orally, address matters that involve risks and uncertainties, including in respect of the Company's prospects for growth and its ongoing access to capital to fund the Company's business plan, among others. Consequently, changes in the following factors, among others, could cause actual results to differ materially from those included in the forward-looking statements: market prices of oil & gas, our exploration and production activities, market conditions, applicable regulations, the exchange rate, the Company's competitiveness and the performance of Colombia's economy and industry, to mention a few. We do not intend, and do not assume any obligation to update these forward-looking statements.
For further information, please contact:
Head of Corporate Finance and Investor Relations
María Catalina Escobar
Phone: (+571) 234 5190
Media Relations (Colombia)
Jorge Mauricio Tellez
Phone: + 571-234-4329
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SOURCE Ecopetrol S.A.