BOGOTÁ, Colombia, July 31, 2019 /CNW/ -- Ecopetrol S.A. (BVC:
ECOPETROL; NYSE: EC) announced today that it formed a joint venture
with Occidental Petroleum Corporation to develop 97,000 net acres
of Occidental's Midland Basin properties in the Permian Basin.
The JV enables Ecopetrol to book ~160 MMboe of proved
undeveloped reserves at transaction closing and provides access to
one of the most prolific resource plays in the world. The JV will
progressively increase production until 2027, when production for
Ecopetrol in the JV is estimated to reach circa 95 kboed.
In addition to its share of future production from the
development acreage, Ecopetrol will second employees to the joint
venture. This will enable Ecopetrol to advance its expertise in
shale development and ensure technology and knowledge transfer from
the Permian Basin to its assets in Colombia. The deal is fully aligned with
Ecopetrol's strategic priorities outlined in the 2019-2021 business
plan, which focus on reserves and production growth, under a strict
capital deployment discipline.
Ecopetrol will pay $750 million in
cash plus $750 million of carried
capital in exchange for a 49-percent interest in the new venture.
Occidental will own a 51-percent interest and operate the joint
venture. During the carry period, Ecopetrol will pay 75 percent of
Occidental's share of capital expenditures.
The joint venture allows Occidental to accelerate its
development plans in the Midland Basin. Occidental will retain
production and cash flow from its existing operations in the
Midland Basin.
"We are excited to partner with one of the largest operators in
the Permian Basin, especially one we have worked successfully with
for so many decades," said Ecopetrol CEO President Felipe Bayon. "This is a key step to enhance our
reserve base and production growth whilst we strengthen our
capabilities in shale development and bring this technology to
Colombia for the economic benefit
of the country."
The transaction is expected to close around year end.
To develop the JV, Ecopetrol incorporated two new companies,
Ecopetrol Permian LLC and Ecopetrol USA Inc., and converted Ecopetrol America Inc.
into Ecopetrol America LLC, which will continue to focus on US GoM
operations.
Ecopetrol USA Inc. was
incorporated in Delaware, and is
100% owned by Ecopetrol S.A. through its subsidiary Ecopetrol
Global Energy SLU. Its objective is the exploration and
exploitation of hydrocarbons.
Ecopetrol Permian LLC was also incorporated in Delaware, and is 100% owned by Ecopetrol
USA Inc. and indirectly by
Ecopetrol S.A. Its objective is the exploration, development and
production of unconventional resources.
The transaction is subject to approvals from U.S.
authorities.
Ecopetrol is receiving financial advice from Credit Suisse,
legal advice from Shearman & Sterling and technical advice from
DeGolyer and McNaughton. Petrie Partners is advising the Board of
Directors of Ecopetrol and rendered a fairness opinion on the
transaction.
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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:
Capital Markets Manager
María Catalina Escobar
Phone: (+571) 234 5190
E-mail: investors@ecopetrol.com.co
Media Relations (Colombia)
Jorge Mauricio Tellez
Phone: (+ 571) 234 4329
E-mail: mauricio.tellez@ecopetrol.com.co
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SOURCE Ecopetrol S.A.