March 6, 2021

Ecopetrol partners with OXY to exploit unconventional deposits in the US



Colombian state-owned oil company Ecopetrol made a strategic alliance with the North American company Occidental Petroleum Corp. (OXY) with the objective of executing a joint plan for the development of unconventional deposits in Texas (USA), business sources reported Wednesday.

The South American company explained in a statement that these deposits are located in Midland, "a sub-basin of high potential located in the eastern part of the Permian basin, recognized as the one with the highest production of hydrocarbons in the world."

That alliance "would allow Ecopetrol a rapid incorporation of proven reserves for about 160 million barrels of oil equivalent to the closing of the transaction, scheduled for the end of 2019, which would represent an approximate increase of 10% compared to 2018 reserves , contributing to the company's oil and financial sustainability. "

Also, "it would enable the Ecopetrol Group to increase production progressively until 2027, when a net production that Ecopetrol estimates at about 95,000 equivalent barrels per day would be achieved."

The company will thus diversify its portfolio because it will incorporate "assets considered short cycle" and will increase "the participation of light crudes to balance the production matrix" of Ecopetrol, which today is concentrated in heavy crudes.

With that agreement, OXY will have 51% of the new company and Ecopetrol the rest after being linked with a 50% down payment at the end of the transaction and 50% in carry (deferred investment in time in activities contemplated in the plan of developing)".

The total payment, the company added, is equivalent to 1.5 billion dollars.

"We are pleased to announce this alliance that is aligned with our strategy. This is a milestone for Ecopetrol because we enter the major leagues of unconventional deposits," said Ecopetrol president Felipe Bayón, quoted in his office statement.

The spokesperson added that with the operation "reserves and production" will be increased and "knowledge in this technology will be strengthened together with a top-level partner".

To make the transaction viable, subject to regulatory approvals in the US, the Colombian oil company created the company Ecopetrol Permian LLC.

The use of "fracking" in Colombia has generated a strong controversy since while its defenders ensure that oil extraction is necessary by this method to increase the reserves that are estimated to reach for about six more years, their opponents say that doing so will cause irreparable damage to the environment and water resources.

. (tagsToTranslate) Ecopetrol (t) OXY (t) conventional (t) deposits (t) USA



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