Colombia’s state-run oil company, is set to complete Wednesday a $1.4 billion public offering that has been dogged by the recent turmoil in financial markets and a slump in crude prices.
The company, which started a COP2.5 trillion ($1.4 billion) offering on July 27, has received COP2 trillion in buy orders, with one day remaining for local for investors to place their purchase, Ecopetrol chief executive Javier Gutierrez told local media.
The company is confident that it will receive enough orders to reach the COP2.5 trillion offered in a share placement for local investors. “We’ve been very pleased with the results and we’re sure that we’ll surpass the COP2,5 trillion mark,” Gutierrez told Caracol Radio.
Ecopetrol’s share placement, which Colombian investors had been expecting for much of this year, came days before the recent global turmoil in international markets and a decline in oil prices.
Colombian stocks were dragged down by the drop in U.S. shares and the slump in crude prices also pushed lower Ecopetrol’s share price. The decline in the stock left Ecopetrol’s shares already listed in the Bogota bourse trading below the COP3,700 price set for the stock offering.
“The company has been unfortunate with the timing,” said Mauricio Restrepo. “It’s a case of bad luck that all the stock markets declined when the offering was being done,” he added. Restrepo, however, says that the company will likely reach the COP2.5 trillion target.
The offering represents a 1.64% stake in the firm and the proceeds will be geared at the company’s exploration and production projects. The company expects to invest $8.54 billion this year as part of an aggressive expansion plan to raise output to 1.5 million barrels per day in 2020.
The share sale comes after the company carried out a stock sale for 10% of the firm in 2007 that became the largest initial public offering on record in Colombia.
The government, meanwhile, has a plan currently under review by Congress to sell another 10% stake in the firm.
The plan originated in December last year after devastating rains lashed much of the country, destroying key roads. The government of President Juan Manuel Santos announced last year that it wanted to sell a new stake in the firm to pay for the rebuilding efforts while keeping the fiscal deficit in check.
Santos has said that the government’s sale of a 10% stake in Ecopetrol will be carried out next year and will be done in small tranches to avoid flooding the local bourse with new shares of the oil firm.
Still, that plan could represent a drag in Ecopetrol stock price. “Going forward, the stock will remain hamstrung by the specter” of billions of dollars in shares that have yet to hit the market, brokerage firm Celfin Capital warned in a research note.