ECOPETROL: Moody's Affirms Company's Baa3 Rating

(RTTNews) - Moody's Investors Service on Friday affirmed Ecopetrol's ratings at Baa3 while raising its outlook to "stable" from "negative."

The move was based on lower reserve replacement risk, strong credit metrics and a limited downside risk due to the investigations on alleged irregularities at the Cartagena Refinery (Reficar), the credit risk rating agency said.

"The rating action was based on our view that, although Ecopetrol's 6.7 years of reserve life as of 2016 is low, its reserve replacement strategy is solid", said Nymia Almeida, a Senior Credit Officer in Moody's.

The rating was also based on Ecopetrol's solid balance sheet and management's commitment to protecting credit metrics, which supports its capital investment strategy.

Regarding the overbilling and irregularities allegations in Reficar, Moody's believes that the company's access to capital markets or its operations will not be significantly affected and it is unlikely that Ecopetrol will be fined by the authorities.

Moodys said that Ecopetrol's Baa3 ratings continue to reflect the company's status as Colombia's largest oil and gas producer, accounting for about two-thirds of the country's output and 100% of its oil products. The ratings also take into account Ecopetrol's solid and relatively stable cash flows.

Finally, the report noted that the stable rating outlook is based on Moody's vision that Ecopetrol will further reduce operating costs, increase the reserve replacement rate and at least maintain reserve life at current levels.