On Thursday, Citi adjusted its outlook on Ecopetrol SA (NYSE:EC), the Colombian-based oil and gas company, by reducing its price target to $11.00 from the previous $12.50. The firm maintained a Neutral rating on the stock. The adjustment reflects concerns about the political environment in Colombia and its potential impact on the company's valuation.
The analyst from Citi noted that Ecopetrol is not commonly included in the main Latin American stock composites, which tends to keep the stock "under the radar." The lack of attention is partly due to investor hesitancy to engage with the perceived risks of politicization affecting the company. Despite this, some investors are speculating on the potential for a political shift in Colombia's 2026 election to favorably re-rate the stock's value.
Citi's stance remains measured, acknowledging that Ecopetrol's valuation may present limited downside risk, citing an expected dividend yield of 8.6% by 2025. However, the firm also pointed out that growing uncertainties could limit the stock's upward potential in the near term. Specifically, the possibility of trading on the outcome of the 2026 election cycle is considered premature.
Additionally, the analyst mentioned the bearish outlook for oil prices from Citi's commodities team, which projects a price of $60 per barrel in 2025. This projection is another factor contributing to the cautious stance on Ecopetrol, as it may influence the company's future profitability and stock performance.
In other recent news, Colombian oil company Ecopetrol delivered a robust financial performance in the first half of 2024, with substantial revenues of COP63.9 trillion, an EBITDA of COP28.3 million, and a net profit of COP7.4 trillion. This strong performance was coupled with the company's highest production in eight years, hitting 750,000 barrels of oil equivalent per day, and a record refining load of 426,000 barrels per day. On the operational front, Ecopetrol announced a gas discovery and record production in the Permian.
In terms of future plans, the company is considering forming a new joint operating agreement with partner Oxy and focusing on energy transition strategies. Despite some challenges such as a decrease in EBITDA in the refining segment and an expected decline in production outlook for the second half of the year, Ecopetrol's transportation segment posted solid financial results and an increase in net income.
In regulatory news, Ecopetrol recently filed a report with the Securities and Exchange Commission (SEC), confirming its compliance with reporting obligations. This routine disclosure underscores the company's commitment to transparency and regulatory compliance. These are recent developments in the company's progress and operations.
InvestingPro Insights
As Citi adjusts its outlook on Ecopetrol SA, real-time data from InvestingPro provides a clearer picture of the company's financial health and market performance. Ecopetrol boasts a solid market capitalization of $20.45 billion, underscoring its prominence in the Oil, Gas & Consumable Fuels industry. The company's P/E ratio stands at an attractive 5.06, suggesting that its shares might be undervalued compared to earnings. Additionally, Ecopetrol's commitment to returning value to shareholders is evident through its significant dividend yield of 35.13%, which has been consistently maintained for eight consecutive years.
InvestingPro Tips highlight that Ecopetrol's stock trades with low price volatility and is currently trading near its 52-week low, indicating a potential entry point for investors. Analysts predict that the company will remain profitable this year, with profitability over the last twelve months already established. For those seeking more detailed analysis, InvestingPro offers additional tips on Ecopetrol's financial metrics and stock performance, providing a comprehensive tool for informed investment decisions.
With these insights and the additional tips available on InvestingPro, investors can better weigh the risks and opportunities presented by Ecopetrol's current market position and the evolving political landscape in Colombia.
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