ECOPETROL S.A. (EC): what the price requires

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/EC

Headline

Field	Value
Ticker	EC
Company	ECOPETROL S.A.
Current price	$15.91/sh
Composition	National sales - Mid-distillates 22% / National sales - Gasoline and turbo fuels 13% / National sales - Natural gas 3% / National sales - Services 3% / National sales - Energy transmission services 3% / National sales - Fuel gas service 1% / National sales - Asphalts 1% / National sales - Plastic and rubber 1% / National sales - LPG and propane 0% / National sales - Roads and construction services 0% / National sales - Polyethylene 0% / National sales - Aromatics 0% / National sales - Fuel oil 0% / National sales - Crude oil 0% / National sales - Other products 1% / Foreign sales - Crude oil 34% / Foreign sales - Roads and construction services 5% / Foreign sales - Energy transmission services 4% / Foreign sales - Fuel oil 3% / Foreign sales - Plastic and rubber 1% / Foreign sales - Diesel 1% / Foreign sales - LPG and propane 0% / Foreign sales - Cash flow hedges 0% / Foreign sales - Natural gas 0% / Foreign sales - Gasoline and turbo fuels 0% / Foreign sales - Other products 3%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin today	28.8%
Must persist for	12.7y
Multiple paid	61x operating income

Solve inputs: computed at a 9.9% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.2 years.

How unusual the bet is: elevated

Reference	Value
vs own history	-0.46σ
sustained it ~10 years at this level	15%
implied end-window share	1%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	11.92x	4	expensive
Earnings	11.13x	3	expensive
Relative	11.47x	4	expensive
Growth	2.37x	3	expensive

Families that call it expensive: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.0%); the inversion above states its own rate.

Per-Model Detail (n=14)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$6.10	2.61x	yes	FCF base $8.5B, growth 25% (input: historical growth), terminal g 4.0%, WACC 9.0%, 5yr projection
DCF Exit Multiple	Growth	$16.95	0.94x	yes	Exit EV/EBITDA: 70.0x / 75.0x / 80.0x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$2.50	6.36x	yes	P/E 22x (blended: static sector reference 10x + trailing (TTM) 149x), scenarios: 16.5x / 22.0x / 26.4x (bear / base = reference held flat / bull), EV/EBITDA 13.2x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$1.16	13.72x	yes	BV/sh $0.61, ROE (TTM) 17.5%, ke 9.3%
Two-Stage Excess Return	Asset	$1.57	10.13x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$6.72	2.37x	yes	Rev $31.7B, growth 30% (input: historical growth; tapered), Terminal P/S: 4.5x / 6.0x / 7.2x (bear / base = today's held flat / bull, cap 6x)
Peter Lynch Fair Value	Relative	$0.96	16.57x	yes	EPS $0.08, growth 2% (input: historical EPS growth), PEG=74.26 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$0.58	27.43x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $8.44B × (1−40%) / WACC 9.0% → EPV (no growth) (excluded from median)
Residual Income	Asset	$1.57	10.13x	yes	BV $0.61 + 5yr PV of (ROE (TTM) 17.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham Number	Asset	$1.05	15.15x	yes	√(22.5 × EPS $0.08 × BVPS $0.61) — Graham's conservative floor
EV/EBITDA Relative	Relative	$0.53	30.02x	yes	EBITDA $9.16B × sector EV/EBITDA 6.0x (excluded from median)
FCF Yield	Earnings	$1.43	11.13x	yes	FCF $8477.7M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$2.59	6.14x	yes	EPS $0.08 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$0.65	24.48x	yes	BV $0.61 × (ROIC 9.5% / WACC 9.0%) (excluded from median)
P/Sales Sector	Relative	$0.93	17.11x	yes	Revenue $31.75B × sector P/S 1.2x
PEG Fair Value	Relative	$3.01	5.29x	yes	EPS $0.08 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$0.87	18.29x	yes	EPS $0.08 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$30.5b
Net debt / NOPAT (after-tax)	4.52x
Net debt / operating income (pre-tax)	2.72x
Interest coverage	3.7x
Burning cash	no

Bullet Takeaways

The dividend is the thesis: a COP 121 per-share payout for 2025 under a 40% to 60% policy puts the ADR yield near 5% at $16.58, and the single decisive question is whether that cash return holds, since it is a fixed share of net income and the company ties the 2026 dividend to commodity prices.

The sovereign overhang is the dominant risk: Colombia's state ownership and a government that has halted exploration, banned fracking, and forced a capex cut from about $4.5 billion to $2.5 billion leave proven reserves covering only about eight years, so the asset base depletes if drilling stays constrained.

Standard valuation models are unreliable for this name because the financials are in Colombian pesos while the ADR trades in dollars; net debt under 1x operating income and interest coverage near 5x keep the balance sheet sound, but first-quarter 2026 EPS of about $0.38 missed the roughly $0.52 estimate, and a soft profit year mechanically shrinks the payout.

Bull Case

One number decides this stock, and it is not earnings: it is the dividend. Ecopetrol is structured to pay out a large share of its profit, with a policy targeting 40% to 60% of net income, and shareholders approved distributing 55.1% of 2025 earnings as a dividend of COP 121 per share, roughly COP 4.4 trillion in total. At the current ADR price near $16.58 that puts the forward yield around 5%, well above the integrated oil-and-gas average. For an investor who buys this name, the question that flips the whole verdict is whether that cash return holds. If oil prices and the Colombian peso cooperate, the payout is the single most decisive metric, and it is being delivered today rather than promised for later.

The operating base behind the dividend is steadier than the headlines suggest. Ecopetrol reaffirmed its full-year production target of 730,000 to 740,000 barrels of oil equivalent per day, and first-quarter 2026 domestic output actually rose about 6,000 barrels per day versus the prior quarter, supported by CPO-09, new wells at Capachos, the Castilla field, and a development well in Putumayo. Reserves reached a four-year high of 1,944 million barrels of oil equivalent in 2025 on a 121% replacement ratio, and the company's own filing details the reserve additions, noting improved-recovery activities at the Pauto and Floreña fields added reserves (FY2025 20-F, accession 0001104659-26-053172). The first quarter showed stronger refining results and cost control offsetting currency and logistics pressure.

The diversification beyond Colombian crude is the underappreciated part. Ecopetrol's revenue spans national mid-distillates, gasoline, natural gas, energy-transmission and toll-road concessions, and petrochemicals, alongside foreign crude sales including a Permian Basin position in the United States. The 20-F describes capital being directed across the portfolio, with stated returns of 6.7% for refining and petrochemicals and 5.0% for energy transmission and toll-road concessions (FY2025 20-F, accession 0001104659-26-053172). That mix of regulated transmission, refining, and U.S. shale gives the cash flow more than one leg to stand on, and at a low single-digit ADR price the market is pricing in very little for the durability of any of them.

Bear Case

The disconnect to lead with is not a ratio, it is a sovereign one: Ecopetrol is controlled by the Colombian state, and the state's energy policy is openly hostile to the company's core business. President Petro has halted new exploration, banned fracking, and added taxes that drove foreign investment away. The consequence shows in the company's own plans: the investment budget was cut from about $4.5 billion to roughly $2.5 billion, which throttles exactly the exploration and development spending an oil company needs to replace what it pumps. When the majority owner's stated goal is to wind down hydrocarbons, minority ADR holders are riding in a vehicle whose driver wants it to slow down.

The reserve math is the structural fragility behind the dividend. Proven reserves cover barely eight years of supply at current run rates, and without sustained additions the asset base depletes inside a decade. The 20-F is candid that reserve estimates carry uncertainty and reflect the regulatory and market conditions at the reporting date (FY2025 20-F, accession 0001104659-26-053172), which is the company telling you these figures move with policy and price. A 121% replacement ratio in one good year does not undo a shrinking exploration program; it postpones the question. A company that cannot drill cannot keep the reserves that fund the payout.

The earnings trajectory and currency exposure compound the risk. First-quarter 2026 EPS of about $0.38 missed the roughly $0.52 estimate by a wide margin, and net income of COP 2.9 trillion sat well below the prior pace as currency, logistics, and weaker realized prices bit. Because the dividend is a percentage of net income, a soft profit year mechanically shrinks the cash return that is the entire reason to own the stock, and the company has said the 2026 dividend is highly dependent on commodity prices. The valuation models are unreliable here because the financials are reported in Colombian pesos while the ADR trades in dollars, so the model fair values are distorted by the currency and units mismatch rather than a clean read. The honest takeaway is that this is a high-yield, policy-constrained, single-country oil major whose payout is the thesis and whose government is the largest risk to it.

Valuation

A standing caution governs this name. Ecopetrol reports its financials in Colombian pesos while the EC ADR trades in U.S. dollars, so the per-share fair values produced by the standard models are distorted by the currency and units mismatch and should not be read as literal price targets. Taken at face value the models would say no valuation family reaches the price, but that spread is an artifact of pesos-versus-dollars arithmetic more than a clean signal that the stock is expensive. Treat the model output directionally, not precisely.

The sounder way to value this stock is the dividend and the cash it throws off. With a dividend of COP 121 per share for 2025 and a 40% to 60% payout policy, the ADR yields roughly 5% at $16.58, above the integrated-oil average. That yield is the return a buyer is actually underwriting, and its durability rests on three inputs: oil prices, the Colombian peso, and net income, since the payout is a fixed share of profit. Net debt sits near COP 30.5 trillion against trailing operating income of roughly COP 40.5 trillion, a net-debt-to-operating-income ratio under 1x and interest coverage near 5x, so the balance sheet can carry the business through a normal cycle.

The bet embedded in the price, read with the units caveat in mind, is essentially that the dividend stream holds despite a government cutting capital spending and reserves covering only about eight years. The historical base rate is not encouraging for that kind of sustained high payout under a depleting reserve base; the company itself ties the 2026 dividend to commodity prices. A buyer here is paying a low absolute ADR price for a high current yield and accepting that the sovereign overhang, not the operating economics, is what sets the ceiling.

Catalysts

The most recent print was the first-quarter 2026 report. EPS came in around $0.38 against a roughly $0.52 estimate, a wide miss, on revenue of COP 28.6 trillion, EBITDA of COP 13.5 trillion, and net income of COP 2.9 trillion. Stronger refining results and cost control partly offset currency, logistics, and market pressure. Domestic production rose about 6,000 barrels per day versus the prior quarter, and the company reaffirmed its full-year output target of 730,000 to 740,000 barrels of oil equivalent per day.

The dividend is the recurring catalyst. Shareholders approved distributing 55.1% of 2025 net income as a dividend of COP 121 per share. Because the payout is a percentage of profit, the 2026 dividend decision will track 2026 net income, which the company has said is highly dependent on commodity prices. The next several quarterly prints, and the realized Brent price and peso exchange rate behind them, are what determine whether the roughly 5% yield is maintained.

The policy backdrop is the slow-moving catalyst with the most leverage. The Petro government has halted new exploration and banned fracking, and Ecopetrol cut its investment budget from about $4.5 billion to $2.5 billion. With reserves covering only about eight years, the watch items are the reserve-replacement ratio in the next annual report, any change in exploration policy, and whether the Permian Basin and reserve-recovery work at fields such as Pauto and Floreña can offset the constrained domestic drilling. Colombian elections and any shift in state energy policy are the events that could re-rate the stock in either direction.

Sources: Ecopetrol Q1 2026 earnings (Globe and Mail, tickeron.com); Ecopetrol reserves report (riotimesonline.com); Ecopetrol dividend analysis (tickeron.com, stockanalysis.com); OilPrice.com on Petro energy policy.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• PBR (PETROBRAS - PETROLEO BRASILEIRO SA)
• (no filing in the citation store)
• OXY (OCCIDENTAL PETROLEUM CORPORATION)
• (no filing in the citation store)
• EOG (EOG RESOURCES, INC.)
• (no filing in the citation store)
• XOM (Exxon Mobil Corporation)
• (no filing in the citation store)
• CVX (Chevron Corp)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.