Ecopetrol Q2 2026 Earnings Call Transcript

Ecopetrol (NYSE: EC ) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call. This content is powered APIs. 1 trillion COP, marking significant increases from the previous year.

The company capitalized on favorable crude oil prices and refining margins, achieving a record throughput of 439,000 barrels per day in refining. Strategic initiatives included advancing energy transition projects, exploration successes in the Caribbean offshore, and a public tender offer for Brava in Brazil. 9 billion in organic investments focused on production and infrastructure. The outlook for the second half of 2026 includes actions to recover production volumes, manage risks from El Niño, and maintain financial discipline, with expected FEPC receivables ranging from 8 to 12 trillion COP.

Full Transcript Natalia, Operator Good morning. My name is Natalia, and I will be your operator today. Welcome to Ecopetrol's earnings conference call, in which we will discuss the main financial and operating results of the second quarter of 2026. There will be a question-and-answer session at the end of the presentation.

Before we begin, it is important to mention that the comments in this call by Ecopetrol senior management include projections of the company's future performance. These projections do not constitute any commitment as to future results, nor do they take into account risks or uncertainties that could materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr.

Juan Carlos Hurtado, Acting CEO of Ecopetrol; Camilo Barco, CFO; and Carlos Mauricio Ávila, Acting Executive Vice President of Hydrocarbons. Thank you for your attention. Mr. Hurtado, you may begin your conference.

Juan Carlos Hurtado Parra, Acting CEO Welcome to Ecopetrol Group's second quarter 2026 earnings conference call. This is Juan Carlos Hurtado Parra, Acting Chief Executive Officer of the Ecopetrol Group. During the second quarter, the Ecopetrol Group successfully capitalized on a favorable international crude oil and fuels market environment, supported by the strength of our integrated business model, differentiated commercial strategy, and disciplined operational execution. 1 trillion Colombian pesos in net income, representing increases of 35, 59, and 235% respectively, compared with the same period last year.

These results reflect our ability to capture value across the entire value chain and were primarily driven by three factors. First, a favorable pricing environment, with Brent averaging 97 USD per barrel and a strong recovery in international refining margins. 67 per barrel compared to the first quarter, despite a challenging environment for heavy crude grades. And third, strong operational execution in transportation and refining, with the latter making a significant contribution to value creation during the quarter.

Regarding investments, we continue advancing according to plan. 9 billion, maintaining our focus on production, energy security, strategic infrastructure, and energy transition projects that support the group's competitiveness and future growth. Additionally, during the first half of the year, we complied with the dividend payment schedule approved by the general shareholders' meeting, reaffirming our commitment to value creation for all shareholders. With respect to the fuel price stabilization fund, during the quarter we received 1 trillion Colombian pesos corresponding to the accrual of the second quarter of 2025.

Furthermore, higher international prices resulted in an accumulation of approximately 6 trillion Colombian pesos during the first half of 2026, the management of which we will continue to pursue with the national government. Let us now move to the next slide to review the key operational highlights of this quarter. From an operational standpoint, we continue advancing our strategic priorities and strengthening the capabilities that support the group's sustainable growth. In exploration, we drilled 3 wells during the quarter, bringing the total to 8 wells during the first half of the year.

We highlight the progress at Copua Su1, at the offshore Caribbean, and, following the quarter's close, the Sandia 1 discovery. These milestones continue strengthening the region's gas potential and enhance the group's resource incorporation outlook. On the inorganic growth front, we advanced with the process related to Brava and Erjia, following the authorization granted by the Securities and Exchange Commission (CVM) of Brazil to resume the public tender offer. We will communicate this to the market and the decisions in due course.

In commercial activities, we continued strengthening our international platform through market expansion, the onboarding of new customers, and the development of trading capabilities. Initiatives such as the new petcokes commercial strategy, the implementation of time charter schemes, and the diversification of ports and destinations enabled us to capture higher margins and generate additional value for the Ecopetrol Group. In our gas and energy transition business, we continued contributing to the country's energy security.

As the Ecopetrol Group, we supply approximately 62% of Colombia's natural gas demand, while continuing to develop solutions to expand supply availability for the market. In 2026, we have offered 293 GBTUD of firm long-term natural gas. Meanwhile, the transmission and toll roads business maintained positive momentum, securing new contract awards totaling USD 428 million, strengthening the growth and value creation of ISA and its subsidiaries. In production, we reached 706,000 barrels of oil equivalent per day.

These results reflected environmental and electrical disruptions affecting certain strategic and growth assets. The most significant was a 76-day blockade that impacted operations in fields located in the Meta Department and delayed the execution of key projects aimed at expanding processing facility capacity. Looking ahead to the second half of the year, we are implementing specific actions to recover these volumes. We also continue to closely monitor risks associated with the operational and weather conditions, including the potential impact of the El Niño phenomenon.

In transportation, volumes increased by 4% compared with the same quarter last year, driven by the optimization of logistics corridors and higher deliveries of refined products. Finally, in refining, we achieved the highest quarterly throughput in our history, reaching 439,000 barrels per day, representing a 6% increase compared to the second quarter of 2025. Supported by high operational availability and a favorable margin environment, this segment consolidated its position as one of the group's main value drivers during the quarter. With that, I will hand it over to Camilo Barco, who will provide further details on the financial results.

Camilo Barco, CFO Thank you, Juan Carlos. Our second quarter of 2026 results reflect the strength of Ecopetrol's integrated business model, our ability to maximize value in a favorable price environment, and the flexibility of our assets, all of this underpinned by rigorous financial and capital discipline. 7 trillion pesos, representing a 59% increase compared to the second quarter of 2025, with an EBITDA margin of 44%, approximately 6 percentage points higher than the same period last year. This performance was driven by the outstanding contribution from the refining segment, which delivered record margins and throughput levels for the second quarter.

In addition, higher transportation volumes and effective commercial management enabled us to capture market opportunities more effectively. As a result, we continued strengthening our financial position. 3 times excluding ISA's debt, while interest coverage maintained its favorable trend relative to the previous quarter. 9 billion in organic investments.

In line with our plan, investments were primarily allocated to Colombia, which accounted for 71%, followed by Brazil 22% and the United States and other countries 7%. This level of execution reflects a disciplined capital allocation strategy focused on high-value projects, operational continuity, and profitable growth, while preserving the group's financial flexibility. By business segment, approximately 63% of investments were allocated to hydrocarbons, followed by transmission and toll roads with 29%, and energy transition initiatives, 8%. 6 trillion pesos during the first half of 2026, the highest level recorded for this period.

Of this amount, 63% positively impacted EBITDA, 20% CAPEX, and the remaining 17% working capital. Let us now move to the next slide. As of the end of the first Half of 2026, the Ecopetrol group reported net income of 9 trillion Colombian pesos, matching in just six months the net income generated during all of 2024. The year-over-year variation in net income is primarily explained by three factors.

6 trillion COP, supported by effective commercial execution that allowed us to capture the benefits of this favorable price environment. 6 trillion Colombian pesos. This effect was partially offset by the impact of a lower exchange rate and inflationary pressures on costs and expenses, which accounted for 2 trillion Colombian pesos. 2 trillion Colombian pesos, mainly explained by the income tax surcharge which increased from 0% in 2025 to 10% in 2026 in line with the Brent price outlook for this year, as well as the recognition of the new wealth tax.

Third, financial and other factors had a net negative impact of 300 billion COP, primarily associated with the liquidity management transaction related to tax credits. 4 times the level reported in the same period of the previous year and the highest quarterly result recorded since the fourth quarter of 2022. Let us now move to the next slide. 3 trillion pesos, maintaining strong financial capacity to support operations, investment plan, and meet its commitments to creditors and shareholders.

1 trillion COP, driven by the positive impact of the higher commodity prices, the FEPC collections, and working capital management through the offsetting of tax credits and inventory management initiatives. , Brazil, ISA, and Permian Basin. As a result, the group generated 6 trillion COP in free cash flow, demonstrating the business ability to sustainably fund its growth. Among the main cash inflows and outflows during the period were 6 trillion pesos in dividend payments both to Ecopetrol shareholders and to non-controlling interests in subsidiaries.

1 trillion pesos, primarily related to debt service payments. Regarding the Fuel Price Stabilization Fund, as of June 2026, the outstanding receivable stood at 8 trillion pesos. This balance includes approximately 2 trillion corresponding to 2025 and an accrual of 6 trillion during 2026. By company, 79% of the balance corresponds to Ecopetrol and the remaining 21% to the Cartagena Refinery.

By year-end 2026, we estimate that the FEPC receivable balance will range between 8 trillion and 12 trillion pesos, subject primarily to the erosion of Brent prices and exchange rates. During the second quarter of 2026, we continued strengthening our financial position through active liquidity management. 3 trillion Colombian pesos and the movement of funds within the group amounting to US$716 million, initiatives that contributed to optimizing liquidity and enhancing the company's financial flexibility. Let us now move to the next slide.

Juan Carlos Hurtado Parra, Acting CEO Thank you, Camilo. Let us now continue with the hydrocarbon segment. In exploration, we continue to execute our activities in line with the plan. Today we are pleased to share very positive news for Colombia regarding the Sandia 1 well located in the Colombian Caribbean offshore.

By the end of the first half of the year we had drilled eight exploratory wells, resulting in two successful discoveries. In March we announced the discovery of the Copoazu 1 well located in the Guajira offshore 0 block. Today we can confirm that during initial testing the well reached a maximum rate of 35 million cubic feet per day, constrained by the maximum capacity of the testing facilities.

Bifita Sur 1 ST2, located in the Llanos 123 E&P contract and operated by GeoPark with a 50% interest in partnership with our subsidiary Hocol, which holds the remaining 50%, was rapidly brought into production after being incorporated into the commercial area of the Saltador discovery. As I mentioned at the beginning, together with our partner Petrobras, we have announced the discovery of the Sandia 1 well located at the Guajira offshore 0 block. This discovery further expands the area's gas resource potential. Regarding the Sirius project, contracts were signed with our subsidiary Hocol for the engineering and permitting of the gas processing facilities in Ballena.

We also made significant progress in the prior consultation process with 120 certified communities. These milestones allow us to maintain the planned schedule for filing the environmental impact assessment. During the first quarter 2027 in the Llanos foothills we completed the drilling of Floreña N18Y ST1, reaching the target depth in June. We are now evaluating the zones of interest to assess the potential.

During the quarter we also filed environmental impact assessments for the Tinamu, Magnus and Kimera discoveries located in the CPO, as we continue advancing these resources towards potential further development phases. Let us go to the next slide please. Going into further detail, together with Petrobras we confirmed the new natural gas discovery with the drilling of the Sandia 1 well in the Guajira offshore 0 block, located 42 km off the Colombian coast and reaching a total depth of 5,440 meters, located 18 kilometers from Sirius and 9 kilometers from Copoazu.

This discovery confirms the gas potential of the Colombian offshore and strengthens the prospects of adding resources that could contribute to energy security in Colombia and the region. Following the completion of drilling and after reaching the target depth on 29 July 2026, we are now evaluating the gas-bearing intervals to characterize the discovery and estimate its results. Potential. Next slide please.

In production, I would like to highlight the strong profitability of our portfolio with EBITDA margins above 40%, up 9 percentage points compared to the same quarter last year, favorable realized prices, and the sale of crude oil cargoes in transit which helped offset lower production volumes. During the first half of the year production averaged 715,000 barrels of oil equivalent per day. This result was mainly impacted by external events, including disruptions to surface operations in the Meta Department and power supply events at strategic growth assets such as CPO09, Chichimena, Castilla and Rubiales.

In particular, temporary restrictions at CPO09, Castilla and Chichimena resulted in deferred production of up to 233,000 barrels per day. Operations are currently progressing toward a gradual stabilization. Our gas business and international production performed in line with expectations, providing stability and diversification to our portfolio. Looking ahead to the second half of the year, we are implementing concrete actions to restore production growth and strengthen value generation.

These actions include: 1. Accelerating activity in the Permian with an additional seven-well campaign in the Delaware Basin, expected to contribute between 4,000 and 5,000 barrels per day of incremental production from late 2026 through 2027. 2. Bringing the LIRIA YZ10 development well in the Llanos foothills into production while maintaining production levels at Gibraltar.

3. Implementing a comprehensive production assurance plan focused on enhanced recovery, additional drilling campaigns particularly in Caño Sur, increased workover activity, and the expansion of production facilities at Castilla. 4.