Building an E&P in Colombia Outlook on Sector Funding Nathan Piper Head of Oil & Gas Research
Preconceptions Exporting the Three ‘C’s Confidential | Investec Corporate & Investment Banking 2 Solutions. Capital. Empowered people.
Reality Stable Democracy and Economy Became OECD member in May 2018 Uribe Santos Duque Established Democracy Peaceful Transitions of Power Centre Right Leadership 2016 Peace Accord signed with FARC Confidential | Investec Corporate & Investment Banking 3 Solutions. Capital. Empowered people.
The Basics Industry started in Magdalena Basin but Llanos Basin is the key producer MAJOR SEDIMENTARY BASINS 2018 AVERAGE PRODUCTION PER BASIN – 0.9MB/D Bogota Confidential | Investec Corporate & Investment Banking 4 Solutions. Capital. Empowered people.
Low Cost Onshore Oil Major Factors Attracting E&P Investment • Low Cost Onshore Oil • Low well costs (<$10m/well), quick to cash flow • Brent linked pricing • Proven Basins with Infrastructure • Over 5,000km of pipelines with spare capacity • Short Cycle Bogota • Discovery to production in months not years • Established Oil Sector • Producing since 1918 • Business Friendly with Competitive Fiscal Terms • No retrospective changes to fiscal terms Confidential | Investec Corporate & Investment Banking 5 Solutions. Capital. Empowered people.
Colombia’s Oil Sector within Latin America A country with oil, not an ‘oil country’, persistently low reserve life index Source: BP Statistical Review, Investec • Brazil and Colombia delivered greatest % growth over the past decade, following regulatory reform • Latin America accounts for ~7% global oil production Confidential | Investec Corporate & Investment Banking 6 Solutions. Capital. Empowered people.
Oil (and coal) remain key exports Oil accounts for 34% of National Exports, 13-15% of tax revenue and 7% of National GDP Source: Comtrade, Ministry of Mines and Energy Colombia exports around 500,000b/d Confidential | Investec Corporate & Investment Banking 7 Solutions. Capital. Empowered people.
Oil Production Declined Dramatically Reforms drove greater activity levels and investment IPO Source: BP Statistical Review, ANH, Investec Multiple licensing rounds Confidential | Investec Corporate & Investment Banking 8 Solutions. Capital. Empowered people.
Outlook for E&P Funding Declining investor interest but funding still available Life Cycle of an E&P Equity Raised by E&Ps on London Stock Market Confidential | Investec Corporate & Investment Banking 9 Solutions. Capital. Empowered people.
Lack of Delivery Sector lacks scale, liquidity and share price performance E&P OUTPERFORMED BY FTSE250, OIL AND S&P500 EQUITY RAISED BY UK E&PS (£M) Confidential | Investec Corporate & Investment Banking 10 Solutions. Capital. Empowered people.
Conclusions Colombia remains attractive and needs to increase activity E&P sector has to focus on shareholder returns to remain relevant Must deliver on ESG metrics Countries and companies competing for declining investment levels Confidential | Investec Corporate & Investment Banking 11 Solutions. Capital. Empowered people.
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