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Ecopetrol (EC) Q2 FY25 earnings call: guidance and Q&A

Earnings call· Jun 2025 (Q2 FY25)· Energy· Aug 13, 2025

Source: earnings call transcript

Executive summary

Ecopetrol Q2 FY25 — Record Production and Strong Efficiency Gains Amidst Price Volatility

Ecopetrol delivered robust operational performance in Q2 FY25, achieving record production and significant efficiency gains that partially offset the impact of declining crude prices and external disruptions. The company maintained capital discipline and advanced its energy transition initiatives, while navigating market volatility and addressing tax-related challenges. Management emphasized its commitment to shareholder value and financial resilience.

Highlights

5

  • Semester production reached 751,000 boe/d, the highest in a decade, driven by fields in Colombia and Permian Basin.

  • Commercial viability declared for Lorito discovery (CPO-09 block) with ~250 MMbbl recoverable resources, the most significant in a decade.

  • Achieved COP 2.2 trillion in efficiencies in H1 2025, exceeding target by 27%, mitigating lower crude prices.

  • Midstream EBITDA increased 9% in H1 2025, demonstrating resilience despite external events and maintenance.

  • Downstream EBITDA recovered 53% YoY in Q2 2025, supported by 95.8% operational availability and improved refining margins ($12.5/bbl).

Concerns

5

  • Crude price fell by 22% compared to Q2 2024, impacting revenue and profits.

  • Net income declined by COP 2.5 trillion YoY in H1 2025, primarily due to market factors (78% of impact) and local environment issues.

  • Midstream transported volumes decreased by 6% QoQ and 4% YoY in H1 2025 due to external events (blockades, attacks) and refinery maintenance.

  • RBSE adjustment impacted ISA's EBITDA by COP 0.6 trillion and net income by COP 0.1 trillion.

  • Potential VAT claim of COP 11 trillion for gasoline and diesel imports from 2022-2024, with an estimated COP 3.6 trillion for 2025.

Guidance & targets

CategoryTargetConfidence
Production target
740,000 to 750,000 boe/d
high materiality
High
Renewable energy for self-generation
exceed 900 MW
medium materiality
High
Upstream investment
$4 billion
high materiality
High
Lifting costs
below $12 per barrel
medium materiality
High
Cost and expense reduction
COP 1 trillion target
high materiality
High
Working capital optimization
COP 2 trillion target
medium materiality
High
Net debt-to-EBITDA ratio
below 2.5x
high materiality
High
VAT payments recovery
93%
medium materiality
High
Gasoline imports reduction
43,000 bbl/d regular gasoline, 8,000 bbl/d diesel
low materiality
Medium
FEC balance
COP 5 billion
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Upstream
Achieved highest semester production in a decade. Permian production increased by 14,000 boe/d YoY. Lorito discovery declared commercial with 250 MMbbl recoverable resources.
Semester production: 751,000 boe/dDomestic crude oil production: 57,000 bbl/dPermian Basin production: 106,000 boe/d (H1 2025)Workovers executed: 180 (H1 2025, 59% increase YoY)Development wells drilled: 220 (H1 2025)
———54% of total EBITDA
Midstream
Solid financial results despite challenging environment due to external events and maintenance. Implemented strategies for operational control and alternative evacuation routes.
Domestic transported volumes: 6% decrease QoQDomestic transported volumes: 4% decrease H1 YoYPozos Colorados terminal storage capacity: 1.5 million barrelsCrude pipeline capacity increase: 7%Evacuation capacity increase: 50,000 to 80,000 bbl/d
——-6%9% increase in EBITDA (H1 2025 YoY)
Downstream
Recovery in financial results driven by improved operational availability and better international gasoline and diesel differentials. Progress on major maintenance cycle (8 of 10 works completed).
Operational availability: 95.8% (Q2 2025)Consolidated throughput: 43,000 bbl/d (Q2 2025)Integrated gross refining margin: $12.5/bbl (Q2 2025)Integrated gross refining margin: $11.7/bbl (H1 2025)
—53%—53% increase in EBITDA (Q2 2025 YoY)
Transmission and Roads (ISA)
Maintained solid operational performance but results partially impacted by RBSE adjustment and provision for outstanding receivables. Continues to be a key pillar for group diversification.
EBITDA reduction: COP 0.6 trillion (due to RBSE adjustment)Net income decrease: COP 0.1 trillion (due to RBSE adjustment)Projects awarded (Colombia): 7 (reference CapEx COP 187 billion)Projects entered operation (Brazil): 7 (estimated investment COP 232 billion)
———17% of consolidated EBITDA

Deals & partnerships

Repsol Acquisition of interest in oil block

Acquisition of 45% interest in Block CPO-09 from Repsol, leading to the commercial viability declaration of Lorito discovery.

Wintec Acquisition of wind project

Agreement signed to acquire Wintec, Ecopetrol's first wind project developed by its own, located in La Guajira.

Civil Aviation Authority of Colombia Alliance to promote Sustainable Aviation Fuels (SAF)

Alliance formalized on July 10 to promote the development of sustainable aviation fuels in Colombia.

AES Framework investment agreement

Signed framework investment agreement with AES.

Statkraft Power purchase agreement

Signed power purchase agreement with Statkraft.

Shell Request to assign 50% interest in offshore block to Ecopetrol

On June 9, 2025, submitted a request to assign Shell's 50% interest in the block in favor of Ecopetrol.

Capital programs

ISA Reinforcement and Improvement Projects (Colombia) awarded COP 187 billion

Benefit:7 projects

Awarded 7 reinforcement and improvement projects.

ISA Reinforcement and Improvement Projects (Brazil) entered operation COP 232 billion

Benefit:7 projects

7 reinforcement and improvements in Brazil network entered operation.

4 Project (Brazil) began commercial operation COP 70 billion

Facilitating the integration of a new solar project in Sao Paulo.

Bolivar Transmission Line Renewal (Colombia) completed COP 16 billion

Completed the renewal of the Bolivar transmission line.

Risks & headwinds

Crude price decline Q2 2025

22% compared to Q2 2024

Mitigation:Diversified crude basket, active marketing strategy, efficiency gains (COP 2.2 trillion in H1 2025).

External events impacting midstream volumes H1 2025

6% decrease QoQ, 4% decrease H1 YoY in transported volumes

Mitigation:Stronger operational control, leveraging technology for rapid detection/repair, alternative evacuation routes, coordination with government agencies.

RBSE adjustment impact on ISA June 2025 (one-time effect)

COP 0.6 trillion EBITDA reduction, COP 0.1 trillion net income decrease

Mitigation:ISA committed to meeting 2025 financial targets and executing 2040 strategy.

Provision for outstanding receivables from ID in ESA H1 2025

COP 0.2 trillion impact on EBITDA, COP 0.1 trillion on net income

Mitigation:ISA committed to meeting 2025 financial targets.

New taxes (state of emergency decree, non-deductible VAT on fuel imports) H1 2025

COP 0.2 trillion impact

Mitigation:Efficiency measures to compensate negative effects.

Potential VAT claim on gasoline and diesel imports Ongoing (legal process up to 5 years)

COP 11 trillion for 2022-2024, COP 3.6 trillion for 2025

Mitigation:Pursuing legal defense, technical working group with government, company considers no provision required.

Geopolitical tensions and third-party disruptions Q2 2025

Declining crude prices

Mitigation:Operational solutions, efficiency gains.

What to watch in Q3 FY25

Permian Basin average production

end of 2025
Current 106,000 boe/d (H1 2025)
Target 90,000 to 190,000 bbl/d (average for 2025)

Why it matters

Verifying if the Permian Basin can sustain high production levels and meet the full-year target, crucial for overall upstream growth.

That's why our expectation by the end of the year with the activities that we've made so far, we expect an average production of 90 to 190 barrels day.

Find out whether EC delivers this. Inve re-checks your case every morning.

Q&A highlights

How was the Permian production peak achieved and what are the expectations for the rest of the year? What are the figures for dividends, taxes, and royalties transferred to the nation for 2024 and expected for 2025?

Permian peak production of 165 bbl/d was due to anticipated activity and better drill performance; expected average production for the year is 90-190 bbl/d. For 2024, COP 11 billion in dividends, COP 9 billion in royalties, and COP 20 billion in taxes were transferred (total COP 40.4 billion). For 2025, COP 23 billion transferred as of June, with an expectation of COP 38 billion total, maintaining the 50% taxes, 25% royalties, 25% dividends proportion.

“This year, we expect to have the same proportion, 50% in taxes, which we can say as of June 2025, we paid about COP 6 billion in tax -- income tax, specifically, COP 3 billion in self withholdings and 3 in income.”

asked by Andres Duarte · answered by Juan Carlos

2 min read 7 chapters

Detailed narrative

Record Production and Strategic Discoveries

Ecopetrol achieved its highest semester production in a decade at 751,000 boe/d, driven by strong performance in Colombian fields and the Permian Basin. The commercial viability of the Lorito discovery (CPO-09 block) was declared, representing the most significant discovery in the past decade with approximately 250 million barrels of recoverable resources.

This milestone enables the development of 13,584 acres and incorporates two wells with a combined production potential of 1,450 bbl/d.

Efficiency and Cost Optimization

The company achieved COP 2.2 trillion in efficiencies during H1 2025, surpassing its target by 27%. These savings primarily impacted OpEx and revenues, with COP 684 billion in OpEx reductions and COP 668 billion in additional income. Key initiatives included tariff optimizations, energy efficiency projects, and synergies in transportation. Lifting costs decreased to $11.59/bbl in H1, maintaining the target below $12/bbl.

Midstream Resilience and Infrastructure Enhancements

The midstream segment demonstrated resilience with a 9% EBITDA increase in H1 2025, despite a 6% decrease in domestic transported volumes due to external events and maintenance. Strategic projects included storage expansion at Pozos Colorados terminal to 1.5 million barrels, increased crude pipeline capacity by 7%, and enhanced evacuation capacity from 50,000 to 80,000 bbl/d.

The operationalization of the Caño Limón pipeline saved COP 77 billion.

Downstream Recovery and Margin Improvement

The downstream segment showed a strong recovery in Q2 2025, with EBITDA increasing 53% YoY, supported by 95.8% operational availability. Consolidated throughput reached 43,000 bbl/d, and the integrated gross refining margin improved to $12.5/bbl, up 37% YoY. Progress on the Cartagena refinery's electrical reliability plan and maximization of high-value products contributed to these results.

Energy Transition and Renewable Energy

Ecopetrol is on track to exceed its goal of 900 MW in renewable energy for self-generation by 2025, with 630 MW accumulated in its portfolio (208 MW operational, 228 MW under construction, 99 MW in execution). The group's electricity demand met by renewable sources increased to 5.6% from 0.6% five years ago.

Energy efficiency measures resulted in 2.42 petajoules of optimization, saving over COP 53 billion and reducing 171,000 tons of CO2e.

Financial Performance and Debt Management

Net income for H1 2025 was COP 4.9 trillion, a decline of COP 2.5 trillion YoY, mainly due to market factors (22% Brent price drop). EBITDA was COP 24.4 trillion, with a strong margin of 40%. The company maintained a healthy cash position of COP 13.1 trillion and a positive free cash flow of COP 3.1 trillion.

Gross debt-to-EBITDA stood at 2.4x, within the long-term target of below 2.5x.

Tax and Regulatory Challenges

Ecopetrol faces a potential VAT claim of COP 11 trillion for gasoline and diesel imports from 2022-2024, with an estimated COP 3.6 trillion for 2025. While the company does not recognize payment obligations for previous years and is pursuing legal defense, it expects to recover 93% (COP 3.3 trillion) of the 2025 payments through refunds. The RBSE adjustment also impacted ISA's financial results.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.