Friday February 15, 2013
by John Persinos, editor The Energy Strategist
Colombia-based Ecopetrol SA (EC) is an up-and-coming company that’s positioned to exert near-monopoly power amid booming, long-term demand.
In 2007, Ecopetrol launched an IPO on the Colombian Stock Exchange, which is largely shunned by investors because of the country’s reputation as a socio-political basket case. But that’s all changing.
The 'War on Drugs' in tandem with a bloody civil conflict has made Columbia symbolic of everything wrong with the Latin American region.
But the beleaguered country is finally on the track to recovery, with an increasingly sophisticated economy and a government that has transitioned from “banana republic” to a parliamentary democracy that emphasizes human rights.
Colombia is now intent on leveraging its greatest economic strength: oil and gas. Colombia may be stained with a bloody history, but the country’s oil production growth over the past 30 years has been a regional success story.
Partly government owned, Ecopetrol is by far Colombia’s largest oil company, with plans to double its output by 2020. Ecopetrol also owns the main refineries in Colombia, and the majority of the country’s oil pipelines and petrochemical plants.
Ecopetrol is benefiting from newly initiated peace talks between Colombia’s government and the Revolutionary Armed Forces of Colombia, or FARC. The peace process is the first in more than a decade and aims to end 50 years of bloody internecine war.
Ecopetrol has constructed a $4 billion pipeline to carry oil from remote areas of the country to its Caribbean ports. It is also creating the necessary infrastructure to ship across the Pacific, to supply the insatiable energy demands of developing markets such as China and India.
In 2012, the company unveiled an ambitious investment plan for 2013, with total expenditures of $9.5 billion, for a production target of one million clean barrels by 2015 and 1.3 million by 2020.
With a trailing price-to-earnings ratio of only about 14, the stock is a bargain considering its growth prospects and virtually unassailable position in the increasingly prosperous and peaceful region. This Latin oil stock will likely pump significant gains into your portfolio.
Learn more about this financial newsletter at The Energy Strategist.