beyondbrics

Ecopetrol has been rummaging around the sale bins for a few years now as part of an aggressive growth strategy aimed at ramping up oil production to 1m bpd by 2015.

In 2009, Colombia’s majority state-owned oil company pulled a real gem out of the bargain bin – Hocol, a subsidiary of Etablissements Maurel Et Prom of France, for $580m, adding 15,000 bpd and 60m barrels in proven reserves, according to Celfin Capital.

Tuesday’s $1.9bn all-cash deal with partner Talisman Energy of Canada to buy BP’s Colombian assets is not the same kind of steal, adding 24,000 bpd and 60m barrels of proven reserves. But it is perfectly aligned with Ecopetrol’s growth strategy, and gives Ecopetrol greater access to some of the most promising exploration fields in the country, all of which sent the stock to a record high.

Ecopetrol has already significantly improved production of known reserves and its growth strategy depends heavily on two key factors: exploration in areas that until recently were still under the control of warring leftist Revolutionary Armed Forces guerrillas and right-wing militias; and acquisitions outside of Colombia, such as its $900m joint purchase with Korea National Oil Corporation of Offshore International Group in Peru.

It’s also worth noting that the BP purchase comes amid a wave of bullishness for Colombian investments as the Andean nation prepares to welcome a new president, Juan Manuel Santos, on August 7, after eight years under Álvaro Uribe.

While not even president Uribe would argue that the war against the Farc is won, or that the country does not still face considerable security challenges, many analysts are buoyant. That includes RBS, which recently published a note entitled “Buy anything Colombian” in which it said: “There is no parallel in recent history where a technocrat (former Finance Minister) [Mr Santos] has become President with an overwhelming 75% mandate in congress.”