According to the Economic Commission for Latin America and the Caribbean (ECLAC), South America and the Caribbean Zone was the most affected region in the world among emerging countries. Nevertheless, Ecopetrol Group proved its strength and value in this period reporting the best quarter in its history and showing its capacity to respond against tough scenarios.
In this quarter the solid results were not only explained by the favorable fundamental variables (Brent of 69.1 USD/BI and Average Exchange rate of 3,691 COP/USD) but also by the excellent management in the firm. Ecopetrol Group continued its commitment to optimize costs and improve its efficiency together with its commercial strategy.
Net sales in the second quarter of 2021 amounted to 19.44 trillion Colombian Pesos (COP) which translates into an increase of 130.3% compared to the same period last year. It is easy to think that the amazing growth is product of the comparison base; however, net sales in this quarter were greater than those of the pre-pandemic years, at least for 2Q19, 2Q18, and 2Q17. The stout performance is mostly explained by the higher weighted average sales price of crude oil gas and products, the improvement of the spread versus Brent, and better reference prices.
As the firm returns to its normal path, costs are returning too. In this quarter total costs rose 50.1% compared to 2Q20. The increase is attributable to higher variable and fixed costs, the former increase 89.4% and the latter 29.4%. While the increment in variable costs is essentially due to an increase in purchases of crude oil, gas, and products, the increment in fixed cost is explained by the normalization of the pace of maintenance activities, materials consumption, contracted services, and other operational activity costs.
Financial income increased both quarterly and accumulated 6M. For this quarter, financial income increase 38.7% in comparison to the same quarter last year; additionally accumulated financial income 6M rose 17.3% compared to 1H20. These results are explained mostly by the exchange rate differences. Ecopetrol Group was benefited from the sale in dollars of its investment in Savia (COP +362 billion) but had some issues in its liabilities due to its position in dollars (COP -291 billion).
In this quarter net EBITDA achieved a new record, being the highest figure ever recorded. This concept showed an improvement of 372.3% compared to the prior-year quarter where it amounted to COP 1.99 trillion. The improvement can also be seen in the accumulated 6M EBITDA, accumulated EBITDA closed at COP 17.6 trillion compared to the COP 7.5 trillion presented in the same period last year.
It is valid to think that this staggering advance is only a product of the comparison base, and part of that is true because 2Q20 was not one of the best quarters for Ecopetrol Group.
However, 2Q21 EBITDA not only returned to its pre-pandemic levels but surpassed them by a landslide.
As with EBITDA, net income achieved extraordinary results as well. In the first half of the year, accumulated net income ended at COP 6.810 trillion, having a difference of COP 6,652 in comparison to the same period in the previous year. In this quarter, net income rose 14,796% compared to the same quarter last year. That is a huge number!
Of course, we have to remember that this stunning growth, same as EBITDA, is product of the comparison base. Even so, similar to the previous concept, the net income figure was the highest ever recorded.
These results are product of a successful commercial strategy, the increase in Permian’s production, and the strategies implemented since 2020 to control costs and capture efficiencies. This game plan has allowed the firm to take advantage of a favorable price environment and mitigate the impacts on the company’s production such as the public order situation or the third peak of COVD-19.
At the end of the second quarter, Ecopetrol Group closed with a cash balance of COP 6.4 trillion (55% in Colombian Pesos and 45% in dollars).
As of June 30, debt on the balance sheet closed at COP 50 trillion, representing a decrease of USD 0.2 billion in comparison to the first quarter of 2021. Likewise, Gross Debt/ EBITDA ratio ended up 1.8 times compared to 2.5 times in the previous quarter.
If these amazing results were not enough, in this quarter the company announced the incorporation of a new commercialization company based in Singapore, with which the good results are expected not only to continue but also to increase.
