Ecopetrol S.A. — 2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021; this is an annual report, not a standalone fourth-quarter filing. Filed April 25, 2022. Consolidated financial statements use IFRS as issued by the IASB and are presented in Colombian pesos (COP).
Key financial metrics
Amounts below are COP trillions unless otherwise indicated.
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | 91.88 | 50.22 | +82.9% |
| Gross profit | 36.30 | 12.66 | +186.8% |
| Operating income | 29.70 | 7.18 | +313.5% |
| Net income | 17.63 | 2.74 | +544.0% |
| Net income attributable to Ecopetrol shareholders | 15.65 | 1.59 | +886.3% |
| Operating cash flow | 22.54 | 9.19 | +145.3% |
| Capital expenditures | 13.29 | 11.12 | +19.6% |
| Cash and cash equivalents at year-end | 14.55 | 5.08 | Higher |
Gross margin was approximately 39.5% versus 25.2% in 2020; operating margin was 32.3% versus 14.3%. Net margin attributable to Ecopetrol shareholders was approximately 17.0% versus 3.2%. Finance results were a net expense of COP 3.70 trillion, compared with COP 2.48 trillion. Income tax expense was COP 8.80 trillion; the effective tax rate was 33.3%, down from 42.7%.
Investing activities used COP 20.52 trillion, including COP 8.95 trillion for the ISA acquisition, net of acquired cash. Financing activities provided COP 6.96 trillion. Year-end loans and borrowings were COP 95.06 trillion; net financial debt was COP 77.58 trillion after cash and other financial assets. The company reported a 46.13% net-debt leverage measure. Current assets of COP 51.70 trillion exceeded current liabilities of COP 30.25 trillion.
Business and operating context
Ecopetrol is an integrated energy company with major oil and gas operations in Colombia and activities in the United States and other Latin American markets. The Nation owned 88.49% of its voting capital. In August 2021, Ecopetrol acquired 51.4% of ISA, adding electricity transmission, toll roads and telecommunications; ISA’s results were consolidated from September 2021.
- Average production was 679 thousand barrels of oil equivalent per day, down from 697 thousand in 2020.
- Proved reserves were 2.002 billion barrels of oil equivalent, up from 1.770 billion; the reserves replacement ratio was 200%, versus 48% in 2020.
- Refinery throughput averaged 355,895 barrels per day, up from 322,038.
- Average Brent crude was US$70.9 per barrel versus US$43.2; Ecopetrol’s average crude basket price was US$66.8 versus US$34.4, and its refined-products basket price was US$79.6 versus US$49.2.
Material changes versus 2020
- The sharp recovery in oil and refined-product prices, higher domestic fuel demand and improved refining margins drove much of the increase in revenue and earnings. Refined-product sales volumes also recovered as pandemic restrictions eased.
- ISA’s acquisition expanded the consolidated business and increased reported assets, liabilities and debt. ISA contributed COP 307.9 billion to income attributable to Ecopetrol shareholders for the consolidated period, before considering acquisition-related financing and costs.
- Net impairment expense fell to COP 33.4 billion from COP 633.2 billion. Exploration and production recorded a COP 438.0 billion impairment reversal, partly offset by impairment charges in refining and transportation.
- Production declined amid pandemic effects, social unrest and road blockades, heavy rains, Gulf of Mexico hurricanes and temporary production limits at Castilla. The filing says affected wells had been reactivated by the report date.
Outlook, management commentary and risks
- The 2022–2024 business plan anticipates US$17–20 billion of investment, primarily funded by internal cash generation, with Brent assumptions of US$63 per barrel for 2022 and US$60 for 2023–2024. Targets include production of 700–705 thousand boepd in 2022 and 730 thousand by 2024; combined Barrancabermeja and Cartagena throughput of 340–360 thousand barrels per day in 2022, rising to as much as 430 thousand by 2024.
- The approved 2022 investment plan is US$4.8–5.8 billion. Ecopetrol’s 2040 strategy includes net-zero Scope 1 and 2 emissions by 2050, a 50% reduction in Scope 1, 2 and 3 emissions by 2050, and zero routine gas flaring by 2030. These are targets, not assured outcomes.
- The company reported COP 6.3 trillion receivable from Colombia’s Fuel Price Stabilization Fund (FEPC) at year-end, plus COP 1.5 trillion receivable at Reficar. The filing also cites total FEPC receivables of COP 14.1 trillion as of March 2022 and cautions that payment timing is uncertain.
- Key risks include volatile oil prices and refining margins, Colombian peso exchange-rate exposure, debt and interest-rate costs, political and regulatory changes, security incidents and pipeline attacks, social disruption, climate and water constraints, and supply-chain pressures. Russia’s invasion of Ukraine had increased commodity-price and market volatility by the filing date.
- Legal and regulatory matters include the unresolved Reficar arbitration against CB&I, in which Reficar seeks at least US$2 billion plus lost profits; numerous proceedings and investigations; and environmental claims. The Kalé unconventional-hydrocarbon pilot’s environmental license was suspended by a court on April 21, 2022; Ecopetrol stated it would appeal.
- The 2021 financial statements received an unqualified audit opinion, and the auditor reported effective internal control over financial reporting. The internal-control assessment excluded ISA, which represented 25.5% of consolidated assets at year-end.
Most important facts for investors to verify
- Review the audited IFRS statements and debt notes, including the COP 95.06 trillion year-end carrying amount of borrowings, ISA-related debt and the remaining acquisition loan balance.
- Check collection and aging of FEPC receivables, including subsequent receipts and any effect on working capital and cash flow.
- Assess whether production, reserve additions and the 2022–2024 investment and operating targets are being achieved, and how much depends on commodity prices.
- Monitor ISA integration, acquisition-related financing, and any regulatory steps required to address Ecopetrol Energía’s electricity commercialization activities.
- Track outcomes of the Kalé and Platero pilot proceedings, Reficar arbitration and investigations, and other material litigation or environmental contingencies.