Finances
Ecopetrol’s financial statements were affected, in comparison with the previous year, due to the drop in international prices resulting from the world economic situation.
Compared to year averages, the WTI (benchmark price of purchase and sale for the western market) for 2009 was US $61.8 per barrel, while in 2008, it was US $99.7, which represents a 38% decrease.
The 8.9% revaluation of the peso in 2009, as well as the change in the structure of assets and liabilities in foreign currency, affected non-operating results, resulting in a net financial expense, while in 2008, there was a net financial income.
Income Statement
Consolidated operating revenue dropped 10% to $30.4 trillion, compared to $33.8 billion the previous year. 46% came from the domestic market and 54% from exports, mainly because more volumes of crude were exported than in 2008.
Unconsolidated operating revenue dropped 15% to $27.6 trillion, compared to $32.7 trillion in 2008.
As a result of the behavior of sale prices, the company reported lower revenues of $66 billion due to the price differential, while in 2008, it reported revenues for $3.07 trillion on regular gas and diesel.
Contracted services, labor costs and maintenance were 12% higher than the total costs of the previous year. Consumption of process materials, chemicals and catalysts increased by 34% as a result of greater operating activity. The hydrocarbon transport service increased 24% mainly due to the use of tank trucks and the operative transport of Guajira gas to the Barrancabermeja Refinery.
Commercialization expenses increased due to the greater volumes of crude transported for export and the rise in customs expenses. Industry and trade taxes generated were $30 billion less due to the drop in revenue.
Gross profit on sales dropped $4.45 trillion and the gross margin as compared to the total revenue was 37%, compared to 45% for the previous year.
Net position in dollars is active and dropped from US $5.9 trillion in 2008 to US 1.6 billion in 2009.
As regards pension expenses, there was a reduction equivalent to $550 billion in comparison with 2008. In 2009, there was no actuarial pension amortization because the current yield on Pension Trusts covered the increase in liabilities and the monthly pension payments.
The provision for income tax was $2.4 trillion less, with an effective assessment of 27.02% compared to 27.33% in December 2008.
The net margin went from 36% to 19% as regards total revenue and net income rose to $5.2 trillion, 55% lower than the $11.6 trillion generated the previous year.
The Ebidta margin on revenue was 38%, seven points lower than the previous year, mainly due to the behavior of international prices, which significantly affected operating revenue. In absolute value, the operating Ebitda dropped to $10.4 trillion, compared to $14.7 billion in 2008.
General Balance Sheet
The company’s capital structure became stronger as a result of the new investments in companies that leverage strategic growth.
On the unconsolidated general balance sheet, total assets closed at $53 trillion, compared to $48.1 billion of the previous year, as a result of the strategic investments made in relation to subsidiaries.
Liabilities closed at $20.3 trillion, compared to $13.5 billion in 2008, mainly due to the effect of new long-term financial obligations.
Equity dropped $1.9 trillion; the net effect is mainly due to the decrease in net income, compensated by the increase in reserves, the valuation of assets in accordance with the new technical appraisal, and surplus based on the method of participation in subsidiaries.
Investment Portfolio
As a result of the evolution of crude prices, strategic acquisitions and the debt offering, Ecopetrol’s financial investment portfolio in dollars (US $2.381 billion on average in 2009), was a timely response to these capital influxes and outflows, remaining diversified in high grade liquid investments.
Returns on Investments
Returns on resources in pesos as well as dollars remained consistently above their benchmarks throughout 2009, responding to the company’s different liquidity needs with a diversified portfolio.
Debt
In 2009, two successful credit operations were carried out. The first took place in May and consisted of a syndicated loan in Pesos with 11 local banks for a total of $2.2 trillion pesos. The second operation was the issuance of 144-A bonds on the New York Stock Exchange for US $1.5 trillion, which had a demand 5 times higher than the amount issued.
The price of Ecopetrol stock in Colombai valued by 24% in the year 2009
Budget Execution
The budget for the year 2009 was prepared using a benchmark WTI of US $50/barrel and an average estimated exchange rate for the year of $2300 Pesos per US $1.
At the end of the period, these variables displayed the following average performance for the year: Benchmark WTI US $61.8/barrel and official exchange rate of $2153 per US $1.
The increased production of Ecopetrol-owned crude and the price increase made a positive impact on the company’s revenue, which in expenses represented higher outlays in purchases of royalty crude, third party crude, purchasing and importing products and higher taxes.
The company executed a budget of $49.8 trillion, which represents a 10% increase compared to 2008. The collection of current revenue, domestic sales and exports amounted to $28.1 trillion. In addition, $4.2 trillion in gasoline and diesel subsidies caused in 2008 were collected with their respective interests and a balance pending from the year 2007.
$6.2 trillion were collected in capital revenue, as a result of the collections corresponding to financial returns, dividends from companies in which Ecopetrol is a shareholder and the outlays made to the company for the syndicated loan and the issuance and placement of bonds abroad.
In expenses, as regards the execution of obligations, which includes operation, commercial operation, debt servicing and investment, $45.1 trillion were committed, the equivalent of 93% the total budget allocated for expenses and investments.
The item operating expenses displayed an execution of $19.4 trillion, which is equivalent to 98% of the budgeted value. $17.4 trillion of the above total was transferred to the National Government and regional entities for the purchase of royalty crude, income and wealth tax, and dividends for the Nation and individuals, representing 90% of the company's total operating expenses.
Personal services reported a 35% increase, basically due to the leveling of salaries consistent with the oil sector, recruiting personnel to achieve the goals and challenges established in the company’s strategic framework, and the knowledge transfer due to the large volume of officers nearing retirement.
The staff went from 6571 in December 2008 to 6695 (including permanent and temporary personnel) in 2009, which is an increase of 178 people. General expenses in real terms rose 19% compared to 2008, affected mainly by the logistics implemented for additional payroll (leases, facility adaptation and IT support, among others), as well as the higher taxes generated in relation to the operation.
The cash flow ended the period with a final balance of nearly $5 trillion, which back $2.1 trillion in accounting and budget accounts payable left at the end of the year. The remaining amount is applied as working capital to start off the new year.
Evolution of Shares on the Colombian Stock Exchange
The price of Ecopetrol shares closed at year’s end at $2485, which is equivalent to a valuation of 24% mainly due to the market recovery, as well as the company’s positive results and its progress toward achieving the objectives of the Strategic Plan. In 2009, the valuation of Colombia's General Stock Market Index was 53%. Ecopetrol shares were the most marketable species, with an average of 10,226,965 shares traded on a daily basis.
Evolution of the Shareholder Base
For the period ending on December 31, 2009, the number of shareholders amounted to 408 thousand, that is to say, 11.3% less than December 31, 2008. This decrease took place mainly in Individuals with 52,100 shareholders (-11.31%) and, in a lesser proportion, in Companies, with 111 shareholders (-0.02%).
For further information on Shareholder Service, refer to the Sustainability Report.
Evolution of the ADR on the New York Stock Exchange
Ecopetrol’s ADR ended the year at US $24.26. This is equivalent to a 32% increase in value, a positive behavior if compared to the valuation of the S&P 500 Oil and Gas index, which represents the most important companies in the oil industry traded on the New York Stock Exchange, which closed 2009 at -4%.
The average volume of ADRs negotiated was 47,586, relatively stable since they were listed. It is important to point out the increase in circulation which went from 1.8 million in December 2008 to 3.8 million in December 2009, as well as the number of institutional investors, 42, with this security in their investment portfolio.
Listing on the Lima Stock Exchange
In December 2009, Ecopetrol’s ADR began trading on the Lima Stock Exchange (BVL). It is the same security listed on the New York Stock Exchange in 2008. The listing was not a new stock issuance, nor did it generate any additional funds for the company.
To Ecopetrol, begin listed on the Peruvian Stock Exchange, one of the most important, dynamic variable yield markets in Latin America, was a milestone in its strategy of positioning on international capital markets, as well as a booster of its position in Peru, one of the focus countries in the growth and internationalization strategy.
Evolution of the Foreign Bond
Since it was issued, the bond has displayed positive performance and had a 12.6% increase in value; similarly, there was a 36 basis point decrease in the spread, compared to the Petrobras’ bond expiring in 2019, 45 basis points compared to the Republic of Colombia’s bond expiring in 2019, and 157 basis points compared to the 10-year US Treasury Bond.
Compliance with National and International Regulations
In 2009, 128 statements of Relevant Information were published at the Colombian Financial Superintendence. Given the obligation to report information simultaneously on the markets on which the company has listed stock, 76 press releases were published in the United States, along with 40 documents using Form 6-K as required by the Securities and Exchange Commission (SEC). All the statements were released in a timely manner and are available on the Comprehensive Stock Market Information System (SIMEV in Spanish), as well as the Company’s website www.ecopetrol.com.co.
Four quarterly releases were made on the company’s operating and financial results and the 20-F report was published in order to improve the timeliness and content of the reports provided.
During the period, a new version of the Regulations for the Dissemination of Relevant Information was published in order to fulfill the company’s obligations in Colombia, as well as the United States, as regards the dissemination of relevant information as a securities issuer.
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