EC - Ecopetrol: Attractive Dividends Plus Upside Potential Rating Unchanged

2024-04-19 05:43:56 ET

Summary

• 2023 was another strong year for Ecopetrol. Crude oil production rose 3.4%, while LNG rose 5.3%. Cartagena refinery realized 41.3% production growth.
• Lower Brent prices, narrower refined product spreads, and higher operating expenses resulted in declining profitability and margins.
• EC has strong liquidity positions and a well-distributed maturity schedule. It holds $3.66 billion in cash and must repay $2.37 billion in 2024.
• The dividend yields are still attractive at 28.7% TTM. EC still trades at a massive discount compared to the Sector Median and its 5Y average figures.

Note: I previously covered Ecopetrol ( EC ) in January 2024. I highlighted EC's strengths: operations in South America, a region with the lowest geopolitical risk, remarkable dividend yields, and extreme undervaluation. I gave a Strong Buy rating. Since then, the price has not moved much. As of April 17, EC stock realized a 1.63% decline since the publication. Today, I review the 2023 results, update the geopolitics and their impact on Ecopetrol, and review the company's valuation and rating.

Operational results 2023

2023 was another successful year for EC. The company recorded 736 mboed in total production. The table below from the 2023 report shows EC's production figures 2023....

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