S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
Investing.com -- S&P Global Ratings has downgraded Ecopetrol S.A. to ’BB’ from ’BB+’ following a similar action on Colombia’s sovereign credit rating. The outlook remains negative.
The rating agency lowered Colombia’s long-term foreign currency rating to ’BB’ from ’BB+’ on Wednesday, citing delayed improvements in the country’s fiscal deficit. The local currency rating was cut to ’BB+’ from ’BBB-’.
Ecopetrol’s ratings remain capped by Colombia’s sovereign rating due to the company’s importance in generating revenue for the country, its status as a government-related entity, and its role in Colombia’s energy transition.
The Colombian government owns 88.49% of Ecopetrol, creating what S&P describes as a "strong link" between the company and the government. As Colombia’s leading oil and gas producer, Ecopetrol plays a "very important role" in the country’s economy.
S&P expects Ecopetrol to maintain consistency in both leverage and profitability while achieving its growth prospects. The agency’s base-case scenario for the next two years projects leverage to remain around 2.0-2.5x and EBITDA margins at approximately 40%.
These credit metrics take into account Ecopetrol’s focus on increasing production and reserves, operating refineries at more than 90% of installed capacity, and implementing its 2040 strategy aimed at enhancing renewable energy sources.
The negative outlook reflects the same outlook on Colombia. S&P indicates it could lower Ecopetrol’s ratings further if Colombia is downgraded in the next 12 months.
The company’s stand-alone credit profile (SACP) remains at ’bb+’ but could be revised downward if its financial performance weakens with adjusted net debt to EBITDA consistently approaching 3.0x, if production declines or replacement ratios fall below 100%, or if the company prioritizes dividends over maintenance and growth capital expenditures.
S&P could revise the outlook to stable if it takes similar action on Colombia’s foreign currency sovereign credit rating.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.