BOGOTA (Reuters) - Colombia’s majority state-owned oil company, Ecopetrol (ECO.CN), reported on Monday a 95% fall in first-quarter net profit, which came in at 133 billion pesos ($34.3 million), following a sharp drop in global oil prices.
The company reported a net profit of 2.745 trillion pesos in the year-earlier period.
The decline in profit was due principally to the sharp fall in international oil prices, Ecopetrol Chief Executive Felipe Bayon said in a statement to the country’s financial regulator.
“The environment of low oil prices and weak demand determines a new reality to which we must adapt,” he said.
Ecopetrol’s results came shortly after Mexico’s Petróleos Mexicanos PEMX.UL, or Pemex, reported a roughly $24 billion first-quarter loss and Brazil’s Petrobras (PETR4.SA) scrapped its debt reduction target.
Global oil prices have fallen on a combination of lower demand amid the spread of COVID-19 and a surge in supply.
The company booked an impairment of 1.209 trillion pesos during the first quarter. Excluding the impairment, net profit for the first three months of the year fell 61% to 1.06 trillion pesos.
Earnings before interest, taxes, depreciation and amortization declined by 29% in the three months ended March 31 to 5.257 trillion pesos, the company said in a statement.
Total sales fell to 15.07 trillion pesos from year-earlier 15.94 trillion pesos, the company said.
Colombia cut its forecasted oil production for the year at the end of April to around 850,000 barrels a day from a previous forecast of 900,000 barrels, if oil prices stay near $35 a barrel.
Ecopetrol said its production was sustainable at $30 a barrel. Brent LCOc1 closed at $29.63 per barrel on Monday.
During the first quarter, Ecopetrol’s production averaged 735,000 barrels of oil equivalent a day, up 1% on the year-earlier period but below the targeted range for the year of 745,000 to 760,000 boed.
Bayon told a virtual news conference that output for the year would be negatively affected by low prices.
“There is going to be an impact on production,” he said, explaining that output for the year would be between 660,000 and 710,000 barrels boed.
Falling production and profits from Ecopetrol will have a negative impact on the spending power of Colombia’s government, which received 3.2 trillion pesos in dividends from Ecopetrol in December.
At the time, the government said Ecopetrol dividends would partly compensate for abandoning plans to raise funds from the privatization of state assets.
Reporting by Oliver Griffin and Julia Symmes Cobb; Editing by Sandra Maler and Peter Cooney