Bloomberg News

Ecopetrol to Spend $11 Billion as Oil Output Gains Slow

November 22, 2011

(Adds stock sale in 13th paragraph.)

Nov. 22 (Bloomberg) -- Ecopetrol SA, Colombia’s largest oil company, plans to invest $11 billion next year in an effort to more than double its crude production in 2020.

The plan, which will be funded by cash and possibly debt, will increase average production to 800,000 barrels a day next year, the Bogota-based company said late yesterday in a statement.

Government-controlled Ecopetrol is proceeding with an $80 billion investment plan through 2020 to increase crude output to 1.3 million barrels. Rising production at Ecopetrol made Colombia the third-largest oil supplier in South America after Venezuela and Brazil as the nation also attracts spending from investors, including billionaires Eike Batista and Carlos Slim.

“This keeps them on track for their 2020 target,” Juan David Pineros, an analyst at Colombia’s largest brokerage Interbolsa SA, said by telephone today from Medellin. “The negative note is production. It’s growing more slowly.”

Interbolsa has a “buy” rating on the stock, which Pineros doesn’t own.

Ecopetrol fell less than 0.4 percent to 3,940 pesos at 12:34 p.m. in Bogota. The stock has dropped 3.9 percent this year, less than a 14 percent decline by Colombia’s benchmark Colcap index.

Production increases next year will slow in part because of construction delays with Ecopetrol’s $4.2 billion Bicentennial pipeline project, Pineros said. Across Colombia, oil infrastructure hasn’t kept up with rising output, he said.

Guerrilla Security

Inroads against guerrilla groups have increased security in the last decade in the Andean nation, which may lead foreign direct investment to reach a record of $12 billion this year, the government said last month.

Third-quarter profit more than doubled at Ecopetrol after oil prices and production rose. Quarterly production of oil and natural gas rose 16 percent to 731,500 barrels a day.

Ecopetrol said it will invest most of its capital budget next year in Colombia, with the rest on exploration and production in Brazil, the U.S. Gulf of Mexico and Peru. The company may increase investment further if it decides to make acquisitions. Last year, the company earmarked $10.6 billion for capital spending in 2011.

Ecopetrol may borrow from banks or sell debt to help finance spending next year, Pineros said. In October, Ecopetrol said it had no need to tap capital markets for funding this year after selling stock.

Ecopetrol sold 2.4 trillion pesos ($1.24 billion) in stock in August, falling short of its target of 2.5 trillion pesos amid a rout in international markets.

Funding for its $80 billion plan to 2020 will include borrowing and the sale of stock, Ecopetrol said.

--Editors: Jasmina Kelemen, Robin Saponar

ECOPETL@ CB <Equity>

To contact the reporter on this story: Heather Walsh in Bogota at hlwalsh@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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