Ecopetrol, Oxy finalize JV deal for Permian development

By Ecopetrol | November 19, 2019

Ecopetrol S.A. has finally completed the joint venture transaction announced last July 31, 2019.  Through this deal, the company and Occidental Petroleum Corp. have agreed to form a strategic alliance or Joint Venture for the development of unconventional reservoirs in approximately 97,000 acres of the Permian Basin in Texas.

For these purposes, Ecopetrol Permian LLC, 100 percent owned by Ecopetrol S.A., has acquired a 49 percent stake in Rodeo Midland Basin LLC, a company incorporated in the State of Delaware, meeting the capital requirements of such jurisdiction and whose economic activity will be directed towards the execution of the joint development plan under the JV. After the transaction, which has an already announced value of approximately $1.5 billion dollars (50 percent in cash and 50 percent in carry), Occidental will retain 51 percent of Rodeo Midland Basin LLC, through its affiliate Occidental Midland Basin LLC. 

For the acquisition and closing of the transaction, Ecopetrol S.A. made an initial payment of approximately $876.5 million dollars (equivalent to 50 percent of the total transaction value) comprised as follows: approximately $750 million dollars corresponding to its share of the transaction value of the JV and then $126.5 million dollars corresponding to the estimated expenditures of the development plan in 2019 between  the effective date of the JV (August 1, 2019) and the rest of the year.  

Presently, there are two rigs in operation in the area. Two wells have been drilled and are in completion in order to achieve their first production by the end of 2019. Activity levels are expected to continue to increase through next year, with four rigs expected to be in operation by the end of 2020. The JV is expected to allow the Ecopetrol Group to incorporate proven reserves of approximately 160 million boe by the end of 2019.

This transaction is aligned with Ecopetrol's strategic priorities outlined in the 2019 to 2021 business plan, which are focused on reserves and production growth under strict capital discipline, supported by exploration activities, enhanced oil recovery, unconventional resources and the internationalization of operations.  It also strengthens Ecopetrol's relationship with a respected, strategic partner, highly experienced in the development of unconventional resources.