Colombia state-directed oil & gas firm Ecopetrol experienced a significant jump in the July issue of Fortune 500 company rankings, up to 280 from 303 in 2012, according to Fortune’s rankings.
In 2012, Ecopetrol recorded strong financial results, reaching $12.7 billion in operating revenues, according to a company report to investors in May. But even though good revenue figures justified the Fortune 500 ranking boost, some market worries have crept up on Ecopetrol.
“The rankings show that income has improved… and it improved the position in the ranking,” equity analyst Diego Usme of Ultrabursatiles, a Bogota-based brokerage, told Colombia Reports on Friday.
“But what I say is that there is a paradox between the ranking and the market response.”
Even though the rankings say that Ecopetrol has a strong financial position, said Usme, who specializes in oil & gas equities, markets have reacted negatively over the fact that the company grew at a slower rate compared to the rates of growth from last year.
Ecopetrol has slid 29% from $59.67 per share to $46.18 per share on the New York Stock Exchange since the beginning of 2013.
But Ecopetrol is determined to defy this market expectation of slowed growth. Production is the caveat. Ecopetrol told Colombia Reports that its 2015 goal is to stabilize production at 1 million barrel equivalents/day and 1.3 million barrel equivalents/day by 2020.
Competition, too, is stronger than ever. “There are now more than 100 petroleum countries in Colombia right now,” noted Ecopetrol.
Since 2003, when the the National Hydrocarbon Agency was created in order to head a set of new regulations, “many companies have come to take advantage of these new rules.” The competition is good, says Ecopetrol.
Some funds in the market agree with the prospect of Colombia’s largest oil & gas firm in a growing, and increasingly more competitive industry. There are now several exchange-traded funds that are country-specific Colombia funds, which aim to capture the opportunities in Colombia’s emerging economy. The most recent is BlackRock’s iShares Colombia Capped ETF (ICOL). Out of the three, Ecopetrol is the most concentrated equity in two of the portfolios.
A lot of things could get in the way of Ecopetrol’s production goals though. According to Usme, Ecopetrol still faces significant challenges with infrastructure construction and security, which could hurt Ecopetrol’s production goals.
“The question is not really whether or not Ecopetrol is growing,” explained Usme. “The question is: What is the rate at which it expands its production? And the markets don’t feel comfortable with the [outlook].”
- Fortune 500 Rankings, Ecopetrol (CNN Money)
- Interview with Equity Analyst Diego Usme (Ultrabursatiles)
- Interview with Ecopetrol Spokesperson (Ecopetrol)
- Ecopetrol Investor Presentation, May 2013 (Ecopetrol)
- Ecopetrol las 280 empresas mas grandes del mundo (Portafolio)
- iShares takes on GXG with Colombia ETF (Nasdaq)
- Ecopetrol share pric 2013 YTD (Google Finance)