Ecopetrol's Blowout Quarter and the New Political Overhang

Ecopetrol reported its strongest quarter in years, with net income of COP 6.1 trillion, up 235% year-over-year, and EBITDA of COP 17.7 trillion on the back of Brent averaging USD 97 per barrel. The results were powered by a record refining performance—integrated throughput of 439,000 barrels per day and a refining gross margin of $29.8 per barrel versus $12.5 a year ago. As the acting CEO summarized:

These results reflect our ability to capture value across the entire value chain and were primarily driven by 3 factors: first, a favorable pricing environment with Brent averaging USD 97 per barrel and a strong recovery in international refining margins.

Record refining margins drive a blowout quarter

The crack spreads were the star. CFO Camilo Barco highlighted that the "refining segment delivered record margins and throughput levels for the second quarter," and the company's commercial management improved crude differentials by USD 3.67 per barrel despite a challenging heavy-crude environment. The strength in refining is not just cyclical; the company points to structural gains in yield, operational integration between Barrancabermeja and Cartagena, and better product slates. With diesel crack spreads hitting an extraordinary $57.60 per barrel, the quarter captured a unique opportunity.

At the same time, transportation volumes rose 4% and the midstream segment transported over 1.1 million barrels per day. The integrated model allowed Ecopetrol to optimize logistics and inventory, offsetting lower domestic production.

The FEPC, the new government, and the fuel subsidy question

The quarter also underlined a central overhang: the Fuel Price Stabilization Fund (FEPC) receivable. As of June 2026, the outstanding balance stood at COP 8 trillion, and the company estimates it could accumulate another COP 8-12 trillion by year-end, depending on Brent and FX. Payments for the 2025 accrual are being collected on schedule, but the larger build-up hinges on policy decisions from the incoming administration. CFO Camilo Barco was explicit: "It is worth clarifying that we haven't really had this dialogue with the new government." The new government's stance on fuel prices, diesel subsidies, and the IPP formula will determine how fast Ecopetrol can monetize these receivables. This is a marked shift from previous calls, where the dialogue was largely with the Ministry of Finance under the outgoing administration. As “we are expecting to have new guidelines and definitions for new policies.” — Alfonso Camilo Munoz, Chief Financial Officer (CFO) · 2026-08-04 The 2026 projection assumes Brent between $84 and $90 and a TRM of 3,200-3,500; for 2027, a lower Brent of $72 would shrink the accrual to COP 1-3 trillion.

The new government also looms over broader strategy. The acting CEO indicated readiness to brief the incoming team on exploration, secondary/tertiary recovery, and the potential for unconventional light oil. But until then, the policy overhang remains. In a prior call, the company had already flagged the sensitivity of cash flows to oil prices: “for every dollar that the Brent changes in the market, we will have impacts on the revenue and the EBITDA and the net profit.” — Ricardo Roa, Chief Executive Officer (CEO) · 2025-05-07 Now, the political vector has been added.

Sandia-1: a gas discovery to redefine the portfolio

Exploration delivered a major positive surprise. The Sandia-1 well, drilled with Petrobras in the Guajira Offshore Zero block, has confirmed a new gas discovery, located only 18 km from Sirius and 9 km from Copa Sul. The acting CEO said, “This discovery further expands the area's gas resource potential.” — Carlos Mauricio Saldarriaga, Executive Vice President of Hydrocarbons · 2026-08-04 The well reached total depth in late July, and the company is now characterizing resource potential. Combined with Copa Sul-1, which tested at 35 million cubic feet per day, and the advancing Sirius project—with environmental impact assessment expected in Q1 2027—Ecopetrol is building a substantial offshore gas hub. This is a genuine portfolio shift toward gas and energy security, a key theme in Colombia.

Brava Energia: the inorganic swing factor

The pending acquisition of a controlling stake in Brava Energia is the other defining event. The company has received the green light from Brazilian regulators and bondholders, and the public tender offer is set to launch. If successful, Ecopetrol will own 51% of Brava and consolidate results from Q3 2026, adding roughly 42,000 barrels of oil equivalent per day. The CFO confirmed, "once this operation is successful, we expect to consolidate the results in our Ecopetrol results at the third quarter of 2026." This aligns with the prior commitment: “We are going for the 51%. If we don't reach that percentage, we're not part of the business.” — Juan Carlos Hurtado Parra, acting president · 2026-05-13 The tender offer structure, combined with a bridge loan and potential liability management, will be a key focus for investors. The company also reiterated its stance on Permian, accelerating a 7-well campaign to offset recent disruptions.

Production recovery and El Niño

While the quarter was spectacular financially, production was the weak spot. First-half production averaged 715,000 boe/d, below the 730-740k guidance, due to a 76-day blockade in Meta and power supply disruptions at CPO-09, Chichimene, Castilla, and Rubiales. The EVP of Hydrocarbons said, “we had an average of 715,000 barrels equivalent per day. And the difference between the guidance that we currently have is associated to what we mentioned in terms of the environment events.” — Carlos Mauricio Saldarriaga, Executive Vice President of Hydrocarbons · 2026-08-04 Management is confident in recovering to the full-year target, with actions including a Permian drilling campaign and production assurance plans. Still, the El Niño weather event poses a further risk to operations, and the company has a comprehensive mitigation plan.

In summary, Ecopetrol has turned in a blowout quarter, but the forward-looking narrative is now dominated by two exogenous forces: the new government's fuel price policy (and the FEPC receivable) and the closing of the Brava acquisition. The Sandia discovery adds a strategic gas option, while production recovery remains the key operational challenge. The market will be watching how the political dialogue and the FEPC accumulation evolve—and whether the company can convert its record cash flow into disciplined growth.