Page 16 - LatAmOil Week 02 2023

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The ratings also reflect the very strong incentive to continue to be low though the rating profile approximately $38 per boe.
of the Colombian government to support Eco- as Brent process continue supporting EBITDA Fitch Ratings, 10 January 2023
petrol in the event of financial distress, given the generation, and debt is expected to remain at
company’s strategic importance to the country, current levels. Fitch expects Ecopetrol’s interest
as it supplies virtually all liquid fuel demand in coverage as measured by EBITDA to interest PERFORMANCE
Colombia, and owns 100% of the country’s refin- expense coverage to exceed 20x consistently
ing capacity. The company relies on the receipt of through the rating horizon. Gran Tierra Energy
funds from the Colombian government, through Positive FCF Expected: Fitch expects Ecopet-
its stabilisation fund Fondo de Estabilizacion de rol’s FCF to be positive going forward, subject to provides operational
Precios de los Combustibles (FEPC), to offset the revisions to investment and dividends plans.
difference from selling fuel in the local market at Fitch’s base case assumption includes the com- and financial update
lower prices versus the export market. pany having an average annual capex budget of
At September 2022, the amount accrued in approximately $5.0bn over the next three years, Gran Tierra Energy has announced an opera-
the FEPC was COP20.4 trillion ($5bn). As the and that it will pay 60% of previous year’s net tional and financial update. All dollar amounts
Colombian government continues to increase income in line with its 40% to 60% dividend pol- are in United States dollars, and production
retail prices of fuel, Fitch expects that the balance icy. This, coupled with Fitch’s price assumptions amounts are on an average working interest
in the FEPC account will decrease. During 2022, for Brent crude oil price of $100 per barrel in before royalties (WI) basis unless otherwise indi-
the price was adjusted by COP600 per gallon, 2022, $85 per barrel in 2023 and $53 per barrel cated. Per barrel and bbl of oil per day amounts
and by an additional COP400 per gallon during in the long term, would result in positive FCF are based on WI sales before royalties.
January 2023. over the next three years. In a message to shareholders, Gary Guidry,
Deconsolidated with ISA: Fitch expects that Stable Operating Metrics: After production President and Chief Executive Officer of Gran
the majority of Ecopetrol’s consolidated EBITDA cuts of 4% implemented in 2020 and subsequent Tierra, commented: “We are excited to announce
will continue to be generated from its oil & gas 6% reduction in reserves resulting from lower that our 2022 total Company average production
business. Fitch estimates that on a deconsoli- global hydrocarbon prices, Ecopetrol’s operating was approximately 30,800 [bpd of oil], which
dated basis, ISA’s EBITDA in 2022, adjusted to metrics have recovered and are well underway to was within our guidance despite several social
Ecopetrol’s ownership, is expected to represent reach pre-pandemic levels. disruptions and a delay in our Moqueta drill-
5.1% of Fitch’s projected Ecopetrol EBITDA for Fitch assumes total hydrocarbons produc- ing programme. Our Moqueta development
2022. Thus, currently, the ISA acquisition is not tion to be 704 thousand barrels of oil equiva- campaign is well underway, with two of the five
expected to materially affect Ecopetrol’s leverage lent per day (boepd) in 2022 exhibiting a trend planned wells having been spud thus far. The
metrics over the rated horizon. or recovery expected to continue over the next initial production results of the first well are
Fitch estimates that consolidated pro forma three years. The company’s proved reserve (1P) encouraging with a stable average rate of 1,312
gross leverage, defined as total debt to EBITDA, of 2,002mn boe gave the company a reserve life [bpd of oil]. We are very excited for what 2023
will be low during the rating horizon at 1.0x for of 9.0 years as of 2021. Fitch assumes a 105% holds for the Company and expect to build off
FYE 2022, and 1.2x on average through 2026. reserve replacement rate. the momentum from the strong finish to 2022.”
Pro forma for ISA’s debt and EBITDA, leverage Ecopetrol’s leverage, as measured by total Operations Update, Production: During
in 2022 increases to 1.5x in 2022 and averages debt/proved reserves, was $7.5 per boe as of YE fourth quarter 2022, Gran Tierra’s total average
2.1x through the rating horizon. 2021 (this including ISA debt), lower than pre- production was approximately 32,600 bpd of oil.
Strong Financial Profile: Ecopetrol’s bbb viously forecast at $10 per boe for YE 2021 as a December 2022 total Company average pro-
Standalone Credit Profile (SCP) reflects the portion of the debt was repaid during the year duction was approximately 33,800 bpd of oil.
company’s strong financial profile. Fitch-calcu- and reserves increased by 95mn boe. Gran Tierra’s total average production for the
lated gross leverage as measured by total debt to Fitch’s calculated implied pre-tax break- full year 2022 was approximately 30,800 bpd of
EBITDA decreased to 2.4x in 2021 from approx- even crude oil price for Ecopetrol has remained oil, which is within the Company’s prescribed
imately 2.9x at YE 2020. Fitch expects leverage relatively stable over the past three years at guidance.

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