Ecopetrol SA's stock saw a sharp decline after Colombian President Gustavo Petro urged the state-controlled oil company to divest its U.S. operations. His stance aligns with his administration's opposition to fracking, which he argues is harmful to both the environment and human well-being.
The company's shares dropped as much as 2.4% in Bogota trading following the president's remarks. Earlier this week, Ecopetrol had announced an extension of its joint venture with Occidental Petroleum Corp. in the Permian Basin, located in the southwestern United States, through June 2026. However, the final decision remains in the hands of Ecopetrol's board, which has previously been inconsistent in approving deals involving U.S. assets. Adding to the uncertainty, the board lost its only two independent members last year.
Political Pressure and Market Impact
During a live-streamed cabinet meeting, President Petro instructed Energy Minister Andres Camacho to pursue the sale of Ecopetrol's U.S. operations and redirect the proceeds toward clean energy initiatives in Colombia. He emphasized the need for a technical and economic discussion on the matter, but insisted that the country should not support activities that contribute to environmental degradation.
According to BTG Pactual analyst Daniel Guardiola, the board has already approved investments and drilling activities for the joint venture's extension period. While the contract appears to be finalized for one more year, Petro's statements have reintroduced uncertainty regarding its long-term future.
Ecopetrol has yet to issue an official response.
Strategic and Financial Considerations
Ecopetrol's expansion in the Permian Basin has played a crucial role in counterbalancing declining oil production in Colombia. BTG Pactual analysts estimate that the U.S. assets, which contributed approximately 14% of the company's total production in Q3 2024, could be valued at $5.5 billion, representing nearly 27% of Ecopetrol's market capitalization.
President Petro, a staunch advocate for climate action, has consistently opposed fracking and new fossil fuel exploration. Despite Colombia's growing natural gas deficit, he has refused to grant new exploration licenses.
This is not the first time Petro has sought to halt Ecopetrol's engagements with Occidental Petroleum. Last year, the company withdrew from a $3.6 billion deal to acquire a stake in Texas shale oil assets from the U.S. energy firm.