Ecopetrol (NYSE:EC) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Ecopetrol reported strong financial performance in Q2 2026, with revenues of 40.2 trillion COP, EBITDA of 17.7 trillion COP, and net income of 6.1 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.
Ecopetrol maintained a strong cash position with 11.3 trillion COP in liquidity and executed USD 2.9 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. As a result, we delivered 40.2 trillion Colombian pesos in revenue, 17.7 trillion Colombian pesos in EBITDA, and 6.1 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. Second, differentiated commercial management, which enabled us to improve our crude oil differentials by USD 3.67 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. As of June, we had executed USD 2.9 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. During the quarter, the Ecopetrol Group generated EBITDA of 17.7 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. The gross debt to EBITDA ratio closed at 2 times at the group level and 1.3 times excluding ISA's debt, while interest coverage maintained its favorable trend relative to the previous quarter.
By the end of the first half of the year, we executed USD 2.9 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%. Efficiency gains continue to be a structural driver of value creation, contributing 2.6 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. First, market-related factors contributed a positive net effect of 5.6 trillion COP, supported by effective commercial execution that allowed us to capture the benefits of this favorable price environment. The increase in the average Brent price from 71 to 88 US dollars per barrel, together with the net effect of crude and product differentials, contributed a combined positive impact of 7.6 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. Second, tax-related factors impacted results by 1.2 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.
During the second quarter of 2026, net income maintained its upward trend and reached 6.1 trillion Colombian pesos, equivalent to 3.4 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. As of June 2026, the Ecopetrol group reported a consolidated cash position of 11.3 trillion pesos, maintaining strong financial capacity to support operations, investment plan, and meet its commitments to creditors and shareholders.
During the first half of the year, operating cash flow reached 14.1 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. Cash flow from investment activities represented an outflow of 8.4 trillion pesos, mainly associated with capital expenditures at Ecopetrol S.A., 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. Additionally, net cash flow from financing activities and other items amounted to 1.1 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. This included the offsetting of tax credits totaling 3.3 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. Evaluating inorganic opportunities that complement our growth strategy and strengthen the long-term sustainability of our portfolio, while we continue to monitor certain external factors including weather conditions associated with the El Niño phenomenon and other elements of the operating environment. The actions underway support our outlook for
Carlos Mauricio Avila Saldarriaga — Vicepresidente de Exploracion Desarrollo y Produccion
a gradual production recovery and strong cash generation through the second half of the year. Next slide please. In refining, we delivered one of our strongest quarters in recent years, achieving a record integrated throughput of 439,000 barrels per day and a refining gross margin of US$29.8 per barrel, compared with US$12.5 per barrel in the same period last year. This performance demonstrates our ability to capture favorable conditions through outstanding operational execution, high plant availability and operational flexibility.
These factors enabled us to strengthen Colombia's energy supply while reducing import requirements. At the Barrancabermeja refinery we achieved record throughput and refining gross margins. Meanwhile, the Cartagena refinery increased throughput compared with the previous quarter and reached a record gross margin of $31.60 per barrel, supported by greater operational stability and the completion of major maintenance activities in key units. We also continued to expand our sources of value creation by developing new markets for coke and sulfur in petrochemicals.
Performance was supported by higher polypropylene sales and favorable commercial conditions across strategic Looking ahead, we remain focused on the disciplined execution of major maintenance activities, preserving asset reliability and prioritizing initiatives that strengthen competitiveness, efficiency and sustainable cash flow generation. Turning now to the midstream segment, it continued to reinforce its role as a key enabler of our integrated business model, transporting more than 1.1 million barrels per day, an increase of 3.8% compared to the same quarter last year, supported by our commercial and operational flexibility, which enabled us to incorporate new volumes, transport imported crude and optimize logistics corridors and inventories, thereby offsetting lower domestic production. These results reflect the segment's ability to maximize the utilization of existing infrastructure and respond quickly to the system's requirements. Key achievements included the optimization of strategic routes and enhanced logistics capabilities to supply refineries and Colombia's domestic fuel market.
Overall, the segment demonstrated strong operational resilience and efficient execution, contributing to the continuity of the integrated business, value capture across the chain and the competitiveness of the group. Next slide please. What do we have in terms of profitability and costs? During the first half of 2026, the hydrocarbon segment continued to improve its profitability through the disciplined execution of operational exchange, efficiency and optimization initiatives, consolidating a more competitive and resilient cost structure.
This performance resulted in EBITDA of 25.7 trillion Colombian pesos, representing a 26% increase compared to the first half of 2025, while the EBITDA margin expanded from 38 to 45%. These results further consolidate the positive shift in cost performance that began to emerge in 2025. During the period, we delivered 1.3 trillion pesos in efficiency gains through operational optimization, energy management, water management and enhanced recovery and new technology.
Moreover, when excluding the foreign exchange effect, our cost indicators show even greater improvements. This confirms that the progress achieved reflects structural efficiency measures rather than shown in terms of costs. Compared with the first half of the year, lifting costs and refining cash costs decreased by 3% and 4% in Colombian peso terms respectively. Meanwhile, the transportation cost per barrel increased by 8% mainly due to the additional requirements related to emergency response and external operating conditions.
Overall, these results demonstrate the ability of the hydrocarbons segments to absorb inflationary pressures and partially offset the impacts of lower production caused by external events as well as higher labor costs. This was achieved through structural efficiency measures that support margin expansion and the long-term sustainability of our results. I will now hand it over to Juan Carlos who will discuss the key highlights of the energies for the transition segment.
Juan Carlos Hurtado Parra, Acting CEO
Thank you, Carlos Mauricio. During the second quarter of 2026, the Ecopetrol Group reaffirmed its role as a key contributor to Colombia's energy security. We currently supply approximately 62% of the country's natural gas demand and year to date we have offered 293 Gbtud of long-term firm gas supply, consolidating our position as the market's leading supplier. At the same time, we maintain an LPG supply equivalent to 38% of national demand and continued advancing strategic projects that will strengthen the competitiveness and growth of our gas business on the Pacific coast.
The Buenaventura regasification project reached 73% completion as of June and it is expected to begin operations in the fourth quarter of 2026 with a capacity of 60 Gbtud. In parallel, we continue progressing through the competitive process to contract LNG supply supporting the long-term marketing of imported gas on the Caribbean coast. We signed the charter agreement for the floating storage and regasification unit at Puerto Valla with an operational capacity of up to 500 million cubic feet per day.
The commercialization process for the domestic market is underway and start-up is expected in the first quarter of 2027. Next slide please. As a part of our commitment to securing Colombia's natural gas supply during the contingency associated with the SPEC's maintenance outage, Ecopetrol implemented coordinated and planned actions across the group that enabled us to deliver an additional 97 Gbtud to the market, helping meet essential demand and support the thermal power generation sector.
Next slide please. We maintain a reliable energy matrix and an increasingly robust renewable energy portfolio. During the quarter we covered approximately 90% of the group's energy demand through self-generation and power supply contracts, maintaining competitive costs and generating significant efficiencies for the business. We continued strengthening our self-generation capacity through the start-up of Thermocoa and the restoration of the Thermaciana generation system.
In addition, we consolidated our position as the country's largest renewable energy self-generator, reaching a portfolio of 951 megawatts. Among the quarter's main achievements were the start-up of the Kifa solar farm, continued progress on the Winpeche wind project and the acquisition of a 49% stake in the JK1 and JK2 wind projects. These initiatives strengthen our long-term growth portfolio and support a responsible energy transition. In terms of energy efficiency, the quarter delivered 1.6 petajoules toward the annual target of 3.14 petajoules, bringing cumulative savings since 2018 to 26.4 petajoules.
These initiatives generated efficiencies of approximately 48.5 billion pesos, reducing consumption, lowering exposure to spot market prices and freeing up additional gas to the market. Next slide. Given the high probability of an earlier weather event during the second half of the year, we have implemented a comprehensive plan aimed at strengthening the group's operational resilience and contributing to the country's energy security. This plan includes increasing the availability of gas and fuels to support national demand, leveraging nearly 2 gigawatts of self-generation and renewable energy capacity, advancing energy efficiency initiatives and ensuring responsible water resources management. It also incorporates preventive measures to mitigate risk associated with wildfires and other climate-related events that could affect our operations. Through these actions, we continue strengthening the reliability of the national energy system while reaffirming our commitment to sustainable value creation for our shareholders and to a responsible energy transition. Next slide for our closing remarks.
During the second quarter, we demonstrated the Ecopetrol Group's ability to translate exceptional market conditions into outstanding results. The combination of favorable prices, differentiated commercial approach and disciplined operational execution enabled us to deliver one of our strongest financial performances in recent years. Refining was one of the key value drivers in this quarter. We achieved record throughput and margins supported by our operational availability and our ability to capture opportunities arising from the international fuels market.
Looking ahead, we remain focused on recovering the production volumes affected during the first half of the year, maintaining discipline in the execution of our investment plan and further strengthening the competitiveness of our businesses. We have a solid financial position and integrated platform that has demonstrated resilience and a portfolio of opportunities that positions us well to deliver on our 2026 objectives. Finally, I would like to highlight that these results were made possible by the commitment and talent of our people.
We are proud that the latest workplace climate assessment conducted under the international standard of the Great Place to Work Institute reflected significant progress, with our score improving from 68 to 77 points in 2025 and our rating rising from very satisfactory to outstanding. For the second consecutive year, we reached the target set by the Great Place to Work Institute, a recognition that reflects a culture built in trust, respect, fairness and the pride of belonging to Ecopetrol.
With that, we will now open the floor for the Q and A session.
Natalia, Operator
Muchas gracias. We will now start with the Q and A session. We remind you a maximum of two questions so that we can have enough time for everyone. We will start with questions. We remind all the analysts to select the language of your choice in the interpretation module. Otherwise we will not be able to hear. You may ask a question.
Tasso, Analyst
Hi everyone, thanks for taking my question here. I think I wanted to take advantage of the recent presidential election in Colombia and the new president potentially with a different view for the oil and gas sector. And I'd like to ask maybe a broader question to management. I'll split the same question maybe in three parts here. First, looking at Ecopetrol in the past three to four years, what would you highlight as the main deliveries? The main project that you enjoyed delivering.
Second part, which projects you had the biggest challenge in either moving forward or even approving and not being able to evolve. And the third part, if we look from now on, what would you like to have as the key priorities for the company? The main projects, the main sub sectors to focus on? Those are the two parts of the question. Thank you.
Juan Carlos Hurtado Parra, Acting CEO
Good morning, Tasso. This is Juan Carlos Hurtado. I am the acting president. As part of the main success we have is the exploration rate that we have achieved in the last few years. And this is of course explained in the announcements we have made in the first quarter with the discoveries of Copuasu and Sandia. One that of course in terms of the that is added to the diversification of our energy grid that is related to more self-generation systems.
We can talk about solar plants that are delivering energy to our premises that we have called Kifa for the fields next to Puerto Gaetan. La Iguana which is also providing or supplying energy to the Barranca and the Casaba fields. And finally Lacira that supplies the historic fields in operation that adds 130 megawatts. Another one to highlight is Porton del Sol is operating La Dora Cal, that's 128 megawatts that are remote operation. These additional achievements we're trying to show the growth in The production of crude oil nationally, mitigating the natural decline of our fields. And we can also advance in a higher recovery factor related to secondary recovery and advancing with tertiary recovery projects with improved water in second place. One of the biggest challenges we have is the environment and all the different processes that we have to do with environmental compliance. We talk about exploratory compliance. In serious, we have been advancing with the prior consultations to be able to define and close the environmental assessment study, to be able to file this in the first quarter of the next year.
And also so that we can have an approval to execute at the end of 2027. Challenges, environment and technical challenges to continue our operations in terms of efficiencies in the production of total fluid, in reducing costs, to have a more optimal operation and in terms of the future. We have been working on a 2040 strategy. At this point we have to highlight that we have focusing on traditional business that is of course related to exploration, production, refining and transportation.
That has been leveraged, as I said, by some of the projects that diversify generation matrix to be more efficient in terms of energy in the future. There is a door that is opening up and it's the opportunity that we have in light crude, light oils and some non conventional fields. In terms of the legal compliance and capital discipline. We have some pilot projects that were suspended depending on what the environment establishes and the different scenarios that we have to work on.
Those we have to continue working on exploratory blocks. And the potential that we are declaring with the Sandia discovery is the gas capacity we have in the northern coast to go into the heavy crudes in the east of the country, in the Meta Department, in the light crude oils in the Magdalena Medio, Middle Magdalena area. And finally advancing in the exploratory projects on the foothills to be able to develop and mitigate the natural decline of gas production fields.
Tasso, Analyst
Very clear. Appreciate it.
Natalia, Operator
The next question comes from Bruno Montanari. Mr. Montanari, you may ask your question.
Bruno Montanari, Analyst
Good afternoon. Thanks for taking my questions. Two on my side as well. One on production and one on the FEPC. On production, can you help us bridge the second half of 2026 outlook on the back of the challenges we saw now in the second quarter? So how should we think about the second half of the year for the company to meet the full year guidance, and if you still expect and if you're comfortable with the prior production target? And within that, do you expect to see any challenges or difficulties related to El Niño with the generation of electricity and other disruptions?
And then on the FEPC, you mentioned you see a potential 8 to 12 trillion pesos accumulation by the end of the year. But looking into next year and within the new government, do you have any expectation to collect those funds maybe quicker than what we were seeing in the past few years? And a quick follow-up on that: when you talk about the 8 to 12 trillion pesos by the end of the year, what type of Brent and FX rate are you assuming to come up with that range?
Thank you very much.
Carlos Mauricio Avila Saldarriaga — Vicepresidente de Exploracion Desarrollo y Produccion
Good morning, Bruno. My name is Carlos Mauricio Avila. I'm in charge of the Executive Vice Presidency of Hydrocarbons. I am going to answer the first question about the production. In fact, as we have been revealing, in the first half of the year we had an average of 715,000 barrels equivalent per day. And the difference between the guidance that we currently have is associated to what we mentioned in terms of the environmental events that we have had, especially in the fields with the largest production, which are in the Meta Department, and the situations responded to a very specific event that happened due to some expectations and some worker claims that were had in the area which ended up in a blockade and stoppage of 16 workover teams for more than 70 days. This of course affected the production in around 23,000 barrels per day. However, these blockades were already lifted last month and we're continuing with the production and recovery in these fields that are of course the ones that contribute the most to the production of crude in the country and of course to the production of the group.
We feel very comfortable with what we have mentioned in terms of keeping the production target between 730,000 and 740,000 barrels per day. We have deployed the actions that will allow us to recover this production that have to do with managing the maintenance of wells for increasing the production that was affected by these blockades. And we're also working on improving the electric reliability which has affected us in the last two months. It is worth mentioning that towards the last days of June we were achieving almost 730,000 barrels per day, which of course is good news and we believe that we are going to continue.
With what was mentioned in terms of the El Niño phenomenon, we have some estimates of what we could end up having in terms of effects on our production and we are mitigating those through different actions that will allow us to guarantee the electric supply where we could have effects due to less availability of energy. Of course, in that respect we continue with what we have been telling the market in terms of maintaining our production levels.
Camilo Barco, CFO
Good morning, Bruno. This is Camilo Barco, CFO, and I will talk to the question about the FEPC. And I will also add some broader elements about how this stabilization fund works for the prices of fuels in Colombia. First of all, about the probability of recovery and the payment schedule. It is important to mention that the payments have been made on time. And the dynamics of these payments is of course something that happens in three-month quotas or payments that expire on a yearly basis.
To give an example, last year we had 3,000 million that were paid in three installments this year: the first one for 1,600 million and the second one for 1,000 million and the other one for 400,000 million. About the last quarter, we came to a payment agreement in December and we expect to collect this payment just as the first and third installments were collected this year. And these are short-term titles and the payments have been made and we continue to receive them.
Likewise, in terms of the figure for accrual, this rate, it is a range between 8 to 12 billion. Of course, this will depend on the behavior of Brent. And the TRM, of course, depends on the crack spreads of the products, especially diesel and gasoline. Those are the ones that have the largest impact on the accrual of this FEPC account. The calculations for this year are made with a Brent projection range for 2026 that is around 84, between 84 and 90 dollars per barrel.
And we are working on this projection with a TRM that is between 3,200 and 3,500 pesos per dollar. For 2027, we will have to wait for the new government to have new guidelines. We understand that it is a priority of this new government to start closing the gap that has been created given the subsidy to fuels. About this there have been different alternatives explored and amongst others, one idea is to increase the price of fuels for the final user.
And one more could be the change in the formula for the EP, which is where we recognize the value to the producer. So this is a series of alternatives that will necessarily depend on the guidelines and the public policies of the new government. As I said, we have manifested publicly the need to solve that gap to reduce the balances. And in that sense we trust that we will continue collecting the FEPC installments or payments, of course, as they mature for next year.
We are working with a Brent projection that is around 72 US dollars per barrel. And the exchange rate is something that we are forecasting to be in that range between 3,200 and 3,600 pesos per dollar. And this of course takes us to foresee that for 2027 we will have an accumulation between 1 and 3 trillion pesos for the FEPC account. This is receivable for Ecopetrol, of course. And of course these estimations, as I said at the beginning, will be related to the volatility of the crack spreads of products, especially diesel and gasoline, and the decisions that the government can eventually make about the behavior of the prices or the adjustments to the final user price for these fuels, or to the way the formula is calculated to recognize Ecopetrol.
Natalia, Operator
We also have Andres Cardona from Citi. Mr. Cardona, you may ask your question.
Andres Cardona, Analyst at Citi
Hi, good morning. Thank you very much for this Q and A session. You were mentioning that you had had a conversation within your government about the prices of fuels. I would like to explore more about these interactions you have had with the new elected government. And we would like you to share with us what could be the most significant changes both for Ecopetrol and for the sector at large, the oil sector. What have you perceived in this new government?
Thank you.
Camilo Barco, CFO
Andres, good morning. This is Camilo. Thank you for your question. It is worth clarifying that we haven't really had this dialogue with the new government. We recognize the general declarations they have made about the fuel price policy and the need to close this gap that is created given the subsidies to diesel fuel especially. However, we are expecting to have new guidelines and definitions for new policies. We have explored different alternatives, but this has not really been very interactive with the new government.
This has just been the result of constant work that is done with the authorities, Ministry of Mines and Energy and the Ministry of Finance. And these are conversations that come from before, really, and have to do with the management of the FEPC account for collecting it. We are expecting that the new government assumes office so that we can open communications channel with them.
Juan Carlos Hurtado Parra, Acting CEO
I am the acting president. Related to that, from the document and all the possibilities we have, we are ready since a couple of weeks ago to be able to give all the information to the new government as they require as part of the projections or forecasts that we have and the opportunities we have. We would like to continue working on exploration and consolidating the recovery factor and the development of secondary and tertiary recovery supported by new technologies, whether they are on-site combustion or improved water.
And we will continue developing the heavy crudes in the foothills and also working on the different exploration development projects that we have in the foothills. And of course thinking about the product, the option of light crude oils related to non conventional fields where we already have had some information. According to the regulations of the company, we have to of course comply with all the environmental legal requirements and our capital discipline and of course distribution to ensure any information that the new government requires.
Natalia, Operator
Thank you. The next question comes from Alvaro Leyba from BTG. Mr. Leyba, your question.
Alvaro Leyba, Analyst at BTG
Good morning.
UNKNOWN, Analyst
Thank you for this possibility to ask questions. My question has to do to the future of Permian and what is the projection you expect for the next quarters and years? I know that you had announced a perforation campaign or a drilling campaign for this year, but I don't know if you can see some declines productions given the deterioration of the productivity or. Or is it because of the current drilling plan? If it's due to the drilling plan, I would like to know whether there will be a review on this year or next year.
Thank you.
Julian Lemos — Vicepresidente Corporativo de Estrategia y Nuevos Negocios
Thank you for your question. I am Julian Lemos, vice president of Corporate Strategy and New Businesses. I would like to talk to your question about the focal point forecast for production in Permian or the performance that we can see. And this is responding to the agreement we have with Oxy and the planning that we did last year considering the price environment that we saw there and the conditions of the industry that we saw that time where we agreed and we reduced the number of preparation equipment and that number of rigs in that area.
And this is of course a reduction in the production compared to what we saw in previous year. Now, according to the forecast, they are aware about the production in terms of what comes next. We are monitoring, regularly monitoring the different market options. And of course the short cycle hydrocarbon allows us a different flexibility. And having agreed with Oxy, we have decided to accelerate or include seven wells that were not part of the 2026 planning.
And as I said, we are continuously evaluating what options we will have. This will have to do with the price scenario that both partners can see for 2027 and to determine whether we will maintain the same level of activity and same number of. To see if we have the same amount of preparation equipment that we would have in the contract or whether we will have to increase that. But that will be discussed and that will be part of the analysis of the surroundings of the environment and the agreement that we make with our partner.
Natalia, Operator
Thank you. That's very clear. We also have Andres Duarte from Corfi Colombiana. Mr. Duarte, you may ask your question.
Andres Duarte, Analyst at Corficolombiana
Thank you. I have two questions. The first one has to do with the knowledge transfer in terms of what you do at Permian, according to the joint venture with Occidental. I would like to know how much of what you have learned can be applicable to the development of non-conventional fields. I understand the Middle Magdalena area was where you had some opportunities. And the second question has to do with the reduction that you can see in the operating cash flow from the second quarter of 2025.
Is that with taxes or is there another reason for the cash flow to be reduced? Thank you for taking my questions.
Juan Carlos Hurtado Parra, Acting CEO
Good morning, Andres. This is Juan Carlos Hurtado, the acting president. In terms of the plan that we had when we started the joint venture with Occidental, we had personnel that was working together and there are still people working and they're working at our subsidiary. But together with Occidental, to work on this learning experience, to be able to capitalize once we can develop these unconventional reservoirs in the country. And we have professionals in terms of reservoirs and production to be the leaders of these projects when they happen.
In terms of the cash flow question, I give the floor to Camilo.
Camilo Barco, CFO
Thank you for the question, Andres, about the variations of the cash flow in this quarter. The answer is yes. This of course responds substantially to the FedEx behavior. And as we said before, this specifically has to do with the 1.6 trillion payment where we came up with a payment agreement with the Ministry of Finance and this payment was postponed to December. Of course that has an effect for the same amount in the cash flow of the quarter. The second part of the answer is that indeed has to do with the taxes.
And there are two components. The first one has to do with the wealth tax. For a total amount that was accrued, that's 1.2 trillion pesos. And that of course has a direct effect on the cash flow. And additionally, when the surcharge, the fuel surcharge, that apart, yeah. From the increase to the market price from $80 upwards, this starts creating a surcharge that is equivalent to 10%. So of course there is a surcharge here and the income tax which has been accrued this year.
These are the reasons for the variation. It is important to mention that the free cash flow, free operating cash flow is a healthy flow. And we have accumulated almost 6 trillion pesos for the year, of which, in the second trimester we generated 2.8. And it is also worth mentioning that historically the second quarter is a strong quarter in terms of the cash flow, because in the second quarter several of the amortizations for debt coincide with payments for taxes.
And what's very important is the dividend payment. This year we paid 6 trillion pesos to our shareholders in dividends, both to the government, the nation as the main shareholder, and to the other shareholders. And this tax payment, which in other years has been crossed with the Fed back payments, this had an impact on the cash flow and its availability. For the end of the year, we can see a stable cash flow above the minimum provided cash flows that we have foreseen.
The second semester would be an accumulation semester. And we consider that we do not have major challenges in the remaining part of the year. In fact, we are foreseeing that apart from the private transaction, there won't be any need to carry out new financing operations to pay our obligations and our investment commitments and production commitments.
Natalia, Operator
Thank you. We continue with Juan Felipe Becerra from Credit Corp. Mr. Becerra, you may ask your question.
Juan Felipe Becerra, Analyst at Credicorp
Thank you for the presentation. I have two questions on my side. The first one is a follow up to the guidance, especially in the volumes. You mentioned that you maintain the production of volumes in the upstream. I would like to know about the transport guidance in the midstream and throughput in the downstream. Given that both would be above the guidance in this half of the year, would you expect then whether you will maintain the guidance in these sectors?
Would you expect a decline in the volumes that are transported and refined? That is my first question. And the second question is whether you could give us a schedule of what will happen after the Brava public offer, given if it's successful, when we would be expecting to see the consolidation of that transaction in terms of a timeline. Thank you.
Juan Carlos Hurtado Parra, Acting CEO
Thank you. This is Juan Carlos Hurtado, acting President. In terms of your first question, our forecast is to maintain this line in terms of volumes in the three segments of the traditional business. In terms of volume, we are maximizing throughput to obtain better margins according to what we have in market, increasing and optimizing our transport system, whether it's oil pipelines or multiproduct pipelines, to maximize the value. And in terms of value, we are maintaining the volumes that we estimated or had foreseen in the period 2026.
Julian Lemos — Vicepresidente Corporativo de Estrategia y Nuevos Negocios
Juan Felipe, this is Julian Lemos, Corporate Vice President for Strategy and New Businesses. I will answer your second question about the timeline for Brava. The past 15th of June, through our subsidiary in Brazil, we received from the authorities in Brazil an answer to our appeal to continue with the stock market operation, with that favorable resource and some elements that, with some prior conditions, we are in the condition to launch tomorrow the auction for this tender offer.
We just wanted to mention that we have green light from the institution in charge and the green light from the bondholders and debt holders for Brava and the green lights from the Board of Directors of Brava in terms of the terms we are launching this function. So this is of course due diligence for the tender offer. If everything is successful tomorrow, on the 17th of August, we would be conducting the liquidation of that tender offer, which is basically disbursement of the resources for the sellers and the verification of the compliance of all the closing conditions.
And from there onwards the corporate role would be the owner of 51% of that company. If everything happens in those dates we mentioned, we would see a consolidation of the Brava results in Ecopetrol for the third quarter of 2026.
Natalia, Operator
Thank you very much. The next question comes from Leonardo Marconde from Bank of America. Mr. Marcondas, you may ask a question.
Leonardo Marcondes, Analyst at Bank of America
It is regarding the offshore assets. I mean, are there any pending environmental or regulatory approvals that could affect the schedule of the development of the blocks?
Natalia, Operator
Thank you very much, Leonardo. Carlos Mauricio.
Carlos Mauricio Avila Saldarriaga — Vicepresidente de Exploracion Desarrollo y Produccion
This is Carlos Mauricio Avila, executive vice president of the hydrocarbons line. In terms of your first question, it has to do with what we are doing to reduce the costs of the upstream, basically beyond having a production guidance. In fact, our message is that we have to guarantee the cost indicators that the segment has. In that sense, we are working very strongly on different initiatives that have to do with the efficiencies program, which basically targets the core of those costs that of course are most important for the segment.
We're talking about costs related to electricity, where the matrix or the grid, in terms of how much it weighs is 26 to 30%. And we are working on that to be able to optimize those net tariffs that are of course created on the segment due to energy consumption. We're also working on water management. One of the challenges that we have in the assets of Ecopetrol, specifically in Colombia, has to do with the management of production fluids. And we're working based on it to reduce water consumption and to consume less energy as well.
We're working to have efficiencies in terms of the costs associated to the services related to the wells, to reduce and implement new technology, implementing options to increase the recovery factor, as the President mentioned, recovery with improved water and other alternatives that will allow us to have other alternatives at lower costs. And everything that has to do with the services contract, where we have implemented a series of strategies so that the costs are reduced in terms of dollar per barrel.
In terms of the environmental approvals or regulatory approvals that could affect the development of the new blocks, what we're doing here is we're trying to work together with each one of the institutions in the government so that we can effectively obtain all the different permits so that we can actually obtain those permits in the times we have foreseen. We have been improving our relationship with all these institutions or entities and we think we can optimize some of those times for those permits.
And there are different projects depending on where we develop them in the country. But we believe that working with the environmental authorities and others, we can keep our goals in terms of complying with our production so that they are not affected by these approvals.
Natalia, Operator
That's very clear. Thank you. From J.P. Morgan.
UNKNOWN, Analyst at J.P. Morgan
Hi, good afternoon. Thank you very much for taking my question. I have two questions. The first one is I want to understand in terms of financing for Brava and what you had already insured, I don't know if it was a bridge loan and then the idea would be to refinance that coming from international markets. How is that transaction structured and, related to that, I wanted to understand if you were analyzing possibilities to conduct a liability management exercise alongside the Brava financing.
Thank you.
Camilo Barco, CFO
Good morning, Alejandra, and thank you for your question. My name is Camilo Barco, CFO. About the first question related to the Brava financing. This is a typical structure for this operation. As you mentioned in the same question, we are going to short-term financing with a bridge loan to finance this acquisition. And we are foreseeing that before the year ends we will do a takeout where we include all the possibilities, a takeout to a long-term credit or also takeout to an operation in the capital market.
And with that I go to the second question about liability management and responsibility. And of course our strategic approach in terms of financing is to optimize costs. We have seen a positive evolution of the margins of the different securities of sovereign debt and the behavior of the corporate bonds. And we can foresee good conditions in the second semester and in the market to continue this type of transaction. We have reduced the financial costs and we will continue working on this with the purpose of prolonging the average maturity of this debt portfolio.
We will continue monitoring the different conditions and assessing all the possibilities of both the banking market and the capital market. Thank you.
Natalia, Operator
We now continue with Hugo Beltrán from Acciones y Valores.
Hugo Beltrán, Analyst at Acciones y Valores
Thank you very much. I would like to ask if you could expand on the liquidity operation on tax credits. What is the magnitude or the dimension of those balances? I mean, we expect this type of liquidity operations in the following periods. And finally, how you are moving forward with litigations with the DIAN in terms of the VAT to fuels that litigation was happening in 2025. Thank you.
Camilo Barco, CFO
Thank you, Hugo, for your questions. I will answer your questions in the same order. The first question related to the tax credits or balances from taxes as you described in the second quarter—sorry. In the first quarter we carried out an operation as one of the levers for liquidity, where we managed to structure the sale of a package of obligations, receivables for Ecopetrol. And this operation had a value of US$500 million. And we were given—Colombian—made a payment around 2 trillion pesos.
And the financial cost is also reflected in that period, but with an amount that is consistent to the discount that we receive due to the anticipated forward sale of these receivables. And this is an operation that can create a good conference or background that can give us liquidity of these sets of receivables that have been growing. So we believe that if in effect this will continue being an alternative mechanism that is possible and that as we need this, depending on the cash flow, when it is worth doing it, this will be an alternative to provide liquidity for the company at very competitive costs that are close to the average financing costs that we have in the rest of the portfolio in terms of—In terms of that operation for the receivables. In terms of the VAT litigation process, we continued advancing in the different instances in this controversy with the tax authorities. We have eight different processes—six led by the Cartagena refinery and two by Ecopetrol. And we have many different appeals that are in process. And we have requested some measures in several of these cases.
And what we could say is that they are basically undergoing the different discussions in the corresponding instances. But I would like to mention that in the previous quarter, Law 2586 was issued by the Congress of our Republic, which is the Customs Charter. And in Article 113 they have a provision for an alternative mechanism for solving controversies with the tax authority. And this is an alternative that we are assessing that offers very favorable conditions to explore an alternative solution to this controversy that has been created around VAT.
While we explore this alternative and we verify and double check the benefit that we would have for Ecopetrol, we will continue moving forward with the litigations. Thanks.
Natalia, Operator
Muchas gracias. Thank you very much. There are no more questions. We will continue with the questions asked in the chat. Mr. Stanichek asks: Considering results of the cooperation with Petrobras in developing the offshore gas resources, is the corporate role to extend this model of alliances to the offshore exploration?
Juan Carlos Hurtado Parra, Acting CEO
Good morning. Juan Carlos Hurtado, Acting President. At this point, given the announcements we have made recently and those were enforced with the discovery of Sandia-1 block, we can see the capacity of developing so important gas volumes in the offshore component. And we are working with Petrobras to develop these exploration capacities, to be able to materialize these resources that we have identified so far and to be able to have the opportunity of discovering other blocks that are within those areas that are shared with Petrobras.
Additional to that, we have the KGG block at 100% and we have been maturing as a corporate role, but we can see alternatives of involving a strategic partner such as Petrobras from now onward to develop the capacities that we would have in terms of volumes and, lastly, being able to move forward with what we have with Anadarko and validating environmental aspects to continue developing the exploration projects.
Natalia, Operator
Michelle Gálvez, Principal Financial Group: the gross margin $29.8 per barrel, with Cartagena at 31.6, Barranca coming at 28.4, depending on the crack spread. Given the disruptions in Hormuz, what refining margin are we assuming for the second half of the year for 2026 if crack is compressed, and how much would the record be for the second half of the year? How much was it structural given synergies?
Julia Savanna, Commercial Vice President
Hi, I'm Julia Savanna, I'm Commercial Vice President and I will answer this good question on behalf of the commercial and refining areas; they will be able to complement my answer. It is true that even though the refining margins of the second quarter benefited from an exceptionally favorable environment, given the diesel products, given the reduction that there was in Africa and Europe especially, and you saw the prices we had, the crack spread for diesel for the second quarter was 57–60.
If you saw this a few days ago, this was at 87. We are not providing a specific guidance for this, but what I can say is in terms of refining, what we have reached—structural. These benefits have been structural. And the margins will continue being determined by external factors, of course, such as the differentials of fuels and the prices of crude oil, which is what we have at the refinery, and the general conditions of the energy market. From the perspective of value creation, it is worth highlighting that that record performance responded to several factors that take me to say that this was a structural benefit.
You heard about the throughputs of the refinery, 240,000 barrels per day, Cartagena exceeding 210,000 barrels per day. And that's not the last thing. We have optimization of the diet and the belief, the fact that we're working both in Barranca and Cartagena with an operational integration and we have more yields from the operational discipline and the decision to go for more valuable products. That is what has been in the process. Even though the market margins were being normalized, we continue strengthening the structural capacities of the refining system to sustain that value capture, which will be competitive.
If the market continues behaving in that way, we will have those crack spreads in the refining area.
Diego Galván, Analyst at Global X
Are we planning to make adjustments in terms of corporate governance to the Board of Directors of Ecopetrol? In the last four years there were changes that had impacted the election of some of the members of the Board of Directors. Any comments? Are you planning on an Assembly in the short term?
UNKNOWN, Legal Vice President and General Secretary
According to the legislation that is applicable and the Social Charter of Ecopetrol, the General Assembly of Shareholders will make decisions about the Board of Directors. And this is the competent body to elect and remove members from the Board of Directors. At the moment, given the resignations of two members, the Board of Directors can continue deliberating and continue deliberating in a valid manner with the members that are still there. This without meaning that the Assembly can be summoned to choose all the members.
When that happens will depend on the specific circumstances. However, once we need to have a full list of candidates, that requires the verification of different requirements and the different conditions established internally. And only once we have conducted those verifications, two weeks after that an Assembly can be summoned. Thank you.
Natalia, Operator
When do you expect to consolidate the results of Brava Energy in the accounts of the Ecopetrol Group? If the acquisition is successful for 51% of ownership, how much do we expect this would contribute in barrels per day of production? This was asked by Harold Rubio.
Camilo Barco, CFO
Thank you very much to Harold for the question. Camilo Barco here again. In the timeline that we have, and once this operation is successful—the tender offer and the auction that follows—we expect to consolidate the resulting results in the third quarter of 2026. And as part of the production that we will have, we expect to receive a contribution of around 42,000 barrels of production that is consistent with the participation of Ecopetrol that is 51%.
Natalia, Operator
Camilo Díaz asks:
UNKNOWN, Vice President
Could you please tell us what is the daily energy demand in megawatts for the group and how much of this demand is covered with self-generation with renewable energy? That means without purchases at MME and the stock market. Good morning, Vice President. Thank you for the question. Ecopetrol has a consumption of 24 gigawatt-hour, which corresponds to 9% of what the country assumes, and of that that Ecopetrol is using every day, 54% is done through self-generation sources.
Out of that 54%, 49 is conventional self-generation and 5% is renewable sources. Those are the figures that we have. And you know that we have a portfolio of renewables that is growing and in solar, 414 megawatts. Thank you for the question.
Natalia, Operator
Another question. Have you thought of a rotation strategy of the ISA portfolio to reduce the level of total debt of the corporate world? If that is the case, could you give us more information?
Julian Lemos — Vicepresidente Corporativo de Estrategia y Nuevos Negocios
Thank you, Camilo, for your question. Julián Lemos, Corporate Strategy and New Business. I would like to start saying that the debt levels of the group are healthy. And as it was previously mentioned by Financial Vice President Camilo, even after the acquisition of Brava, we will continue being within the limits that were previously reported to the market. However, this portfolio rotation exercise is something that we permanently do in the company and we are assessing different alternatives for that purpose and we will be informing the market when they are executed or when they are about to be executed.
Natalia, Operator
Thank you. We conclude this Q&A session. We now give the floor to the President of Ecopetrol for final remarks.
Juan Carlos Hurtado Parra, Acting CEO
Thank you very much. I would like to thank all of you for participating and for your interest in the results of the second quarter and the forecast that we have for 2026 and onwards. Thank you to the team for your participation and thank you for the results. Have a great day.
Natalia, Operator
Thank you. Thank you, everyone. And with this we conclude our results call for the second quarter 2026. Thank you for your participation and the call will end now. Thank you.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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