BOGOTÁ, Colombia, May 17, 2017 /CNW/ -- Ecopetrol S.A. (BVC:
ECOPETROL; NYSE: EC) announced that it will be unable to file its
annual report on Form 20-F for the year ended December 31, 2016 by May
16, the end of the fifteen-day extension period that the
Company obtained by filing Form 12b-25 with the Securities and
Exchange Commission.
The Company does not anticipate any changes from the results
reported in its 2016 earnings release published on March 6, 2017, except for those changes generated
by the conversion of its numbers to full International Financial
Reporting Standards (IFRS) when it publishes its annual report on
Form 20-F. Ecopetrol´s audited financial statements have been duly
presented in Colombia in
compliance with local financial regulations and authorities. To the
best of Ecopetrol´s knowledge, the financial statements continue to
fairly represent the financial and operational condition of the
Company in all material aspects, and its internal controls remain
effective.
To be prudent, however, and in order to exercise due diligence,
the Audit Committee of the Board of Directors has retained a
U.S.-based outside law firm to commence a third-party investigation
into the matters set forth in the Prosecutor's Office announcement,
as more fully described below.
In light of the Prosecutor's Office announcement, the Company´s
auditor for 2014-2015 has said it is not ready to consent to the
use of its opinion in connection with the filing of the Form 20-F,
and accordingly will continue to monitor the progress of the
third-party investigation.
In order to address the non-filing of the 2016 Form 20-F, the
Company will hold a conference call tomorrow May 17 at 3.45 pm
Bogotá (4.45 pm EST). Details of the
call will follow shortly.
Due to the inability of the Company to file its 2016 Form 20-F
by May 16, we consider relevant to
update on the current status of the most significant ongoing
investigations and proceedings with regards to Reficar.
Ecopetrol is a corporation majority owned by the Colombian
Government that administers public resources and Reficar is a
wholly owned subsidiary of Ecopetrol. Ecopetrol's employees have a
statutory responsibility to ensure the proper use of public
resources. Reficar´s employees also have a duty for proper
management of public resources.
The conduct of Ecopetrol's and Reficar's employees is generally
subject to the control and supervision of the following control
entities, among others:
- The Office of the Comptroller General (Contraloría General de
la República) is the state entity entrusted to ensure the proper
use of public resources and has the authority to investigate public
employees or private sector employees that use or manage public
resources.
- The Attorney General's Office (Procuraduría General de la
Nación) is the entity that supervises compliance with applicable
law by public employees and private sector employees that carry out
public functions. The Office has the responsibility for
investigating and disciplining individuals in respect of any
failure to so comply.
- The Prosecutor's Office (Fiscalía General de la Nación) is the
entity in charge of investigating potential crimes and prosecuting
alleged crimes before the court in judicial proceedings.
The following are the most significant investigations and
proceedings carried out by the aforementioned state entities:
1. The Office of the Comptroller
General's investigations and proceedings:
As a result of the modifications of the schedule and budget
related to Reficar´s expansion and modernization project (the
"Project"), the Office of the Comptroller General initiated a
special audit investigation of the Project in 2016 and delivered a
final report to Reficar on December 5,
2016. The report made 36 findings, most of which were
related to increased costs compared to budget for services, labor
and materials, which were appropriately explained by the company.
As required, on January 18, 2017,
Reficar submitted an action plan addressing the 36 findings in the
following areas: (i) contract management, (ii) supervision of
engineering standards contracted with third parties and (iii)
documentation of the control, reporting and monitoring mechanisms
of subcontracts.
As a result of the findings described above, the Office of the
Comptroller General recently opened actions for financial
responsibility (proceso de responsabilidad fiscal) against
36 individuals and the six companies involved in the Project,
including current and former members of Ecopetrol´s board of
directors (including the current CEO of Ecopetrol); former members
of Reficar´s board of directors; current and former employees of
Ecopetrol; and former employees of Reficar, as well as Chicago
Bridge & Iron Company N.V., CBI-Chicago Bridge & Iron
Company (CB&I) Americas Ltd., Chicago Bridge & Iron Company
CB&I UK Limited, CBI Colombiana S.A., Foster Wheeler
USA Corporation and Process
Consultants Inc.
These actions pertain to an eventual reduction of the value of
state assets due to a lower than expected profitability of Reficar
as a result of the modifications of the schedule and budget of the
Project.
In January 2017, the Office of the
Comptroller General initiated another special audit of Reficar. As
of the date of this release, the audit is in its preliminary
stage.
2. The Attorney General's Office
investigations:
The Attorney General´s Office has two ongoing investigations
relating to the Project: (i) the first, initiated in 2012 against
members of Reficar's board of directors at the time, as well as
certain current and former officers of Reficar; and (ii) a more
recent investigation regarding delays in the completion of the
Project, focusing on the role of current and former officers of
Ecopetrol, as well as current and former members of Ecopetrol's
board of directors.
3. The Prosecutor's Office
investigations:
The Prosecutor's Office is conducting a confidential
investigation. In connection therewith, on April 27, 2017, the Prosecutor's Office announced
in a press release his intention to pursue charges (including
document forgery, illegal interest in the execution of agreements,
misappropriation of public funds and unjust enrichment) against:
(i) four former executives and officials of Ecopetrol and
Reficar, (ii) one current employee of Ecopetrol who was
assigned to work in Reficar between 2012 and 2016, (iii) two
executives of CB&I and (iv) Reficar's statutory auditor for
2013-15.
No current executives of Ecopetrol, Reficar or members of the
board of directors of Ecopetrol or Reficar are included in the
Prosecutor's Office press release. In the press release, the
Prosecutor's Office also announced that, in order to conclude the
next phases of the investigation -- related to, among others, the
selection of a strategic partner, the exit of Glencore
International AG (the former majority owner of the Project) and the
selection of the contractor -- it would be interviewing executives
of Ecopetrol, Reficar, Glencore and the supervisory joint venture
conformed by Foster Wheeler USA
Corporation and Process Consultants Inc.
Ecopetrol and Reficar have cooperated closely and extensively
with the control entities in furthering their investigations and
will continue to monitor the status and development of these
investigations.
In March 2016, Reficar filed a
Request for Arbitration before the International Chamber of
Commerce against Chicago Bridge & Iron Company N.V., CB&I
(UK) Limited, and CBI Colombiana S.A. with respect to the
Engineering, Procurement, and Construction Contract entered into by
and between Reficar and CB&I for the expansion of the Cartagena
Refinery in Cartagena, Colombia. Reficar seeks no less than
US$2 billion in damages plus lost
profits. On May 25, 2016, CB&I
filed an answer and counterclaim in the amount of approximately USD
$213 million. On June 27, 2016, Reficar responded to CB&I's
counterclaim by denying any liability to CB&I. On April 28, 2017, Reficar submitted its Non-
Exhaustive Statement of Claim and CB&I submitted its Statement
of Counterclaim. The ICC proceeding is currently in its preliminary
stage and is scheduled for a hearing in October 2018.
Ecopetrol is the largest company in Colombia and is an integrated oil & gas
company; it is among the top 50 oil companies in the world and
among the four top ones in Latin
America. Besides Colombia -
where it generates over 60% of the national production - it has
exploration and production activities in Brazil, Peru
& the US (Gulf of Mexico).
Ecopetrol owns the largest refinery in Colombia and most of the pipeline and
multi-product pipeline network in the country, and is significantly
increasing its participation in bio-fuels.
This release contains statements that may be considered
forward looking statements within the meaning of Section 27A of the
U.S. Securities Act of 1933 and Section 21E of the U.S. Securities
Exchange Act of 1934. All forward-looking statements, whether made
in this release or in future filings or press releases or orally,
address matters that involve risks and uncertainties, including in
respect of the Company's prospects for growth and its ongoing
access to capital to fund the Company's business plan, among
others. Consequently, changes in the following factors, among
others, could cause actual results to differ materially from those
included in the forward-looking statements: market prices of oil
& gas, our exploration and production activities, market
conditions, applicable regulations, the exchange rate, the
Company's competitiveness and the performance of Colombia's economy and industry, to mention a
few. We do not intend, and do not assume any obligation to update
these forward-looking statements.
For further information, please contact:
Head of Corporate Finance and Investor Relations
María
Catalina Escobar
Phone: (+571) 234 5190
E-mail: investors@ecopetrol.com.co
Media Relations (Colombia)
Jorge Mauricio Tellez
Phone: + 571-234-4329
Fax: +571-234-4480
e-mail: mauricio.tellez@ecopetrol.com.co
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SOURCE Ecopetrol S.A.