S&P Global Ratings affirms Ecopetrol's Stand-Alone Credit Profile (SACP) while adjusting its global credit rating

Rhea-AI Summary

Ecopetrol (NYSE: EC) has received a downgrade in its global credit rating from BB+ to BB by S&P Global Ratings, while maintaining a negative outlook. The downgrade follows Colombia's sovereign rating reduction on June 26, 2025. However, S&P affirmed Ecopetrol's Stand-Alone Credit Profile (SACP) at bb+.

The rating agency expects Ecopetrol to maintain a leverage ratio between 2.0x and 2.5x, with an EBITDA margin near 40%. S&P positively acknowledged the company's 2040 strategy, focusing on growth prospects, reserve replacement, operational efficiency, and business diversification.

Positive

• Stand-Alone Credit Profile (SACP) maintained at bb+
• Expected EBITDA margin of approximately 40%
• Strong operational metrics with high refinery availability
• Positive outlook on 2040 strategy focusing on growth and diversification

Negative

• Global credit rating downgraded from BB+ to BB
• Negative outlook maintained following sovereign downgrade
• Leverage ratio (debt/EBITDA) expected between 2.0x and 2.5x
• Rating constrained by Colombia's sovereign rating due to government relationship

Insights

Financial Analyst

Ecopetrol's downgrade to BB reflects Colombia's sovereign issues, not company performance; will increase borrowing costs despite solid operations.

S&P's downgrade of Ecopetrol from BB+ to BB with a negative outlook requires careful interpretation. The action reflects a sovereign ceiling effect rather than company-specific concerns, directly following Colombia's sovereign downgrade on June 26.

The critical distinction lies in S&P affirming Ecopetrol's Stand-Alone Credit Profile at bb+, indicating the company's intrinsic creditworthiness remains unchanged. This distinction matters because it signals that Ecopetrol's operational and financial fundamentals remain solid, with S&P expecting:

• Leverage ratio (debt/EBITDA) between 2.0x-2.5x
• EBITDA margin of approximately 40%

Despite these healthy metrics and S&P's positive view of Ecopetrol's 2040 strategy (focusing on growth, reserve replacement, refinery optimization, and portfolio diversification), the company faces the unavoidable reality of being cap-limited by sovereign constraints.

This rating action illustrates the classic "sovereign ceiling" dilemma faced by government-related entities. Regardless of operational excellence, Ecopetrol's rating cannot exceed Colombia's due to three key factors:

• The company's significance in national revenue generation
• Its status as a government-related entity (the government holds majority ownership)
• Its role in Colombia's energy transition

For investors and creditors, this downgrade will likely increase Ecopetrol's borrowing costs and could constrain its financial flexibility. The negative outlook suggests continued pressure, with further downgrade risk if Colombia's sovereign rating deteriorates further.

BOGOTA, Colombia, June 27, 2025 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC, the "Company") informs that on June 27, 2025, the credit rating agency S&P Global Ratings downgraded Ecopetrol's global credit rating from BB+ to BB and maintained the negative outlook. This action is aligned with the downgrade of the Republic of Colombia's sovereign rating on June 26, 2025. Additionally, the agency affirmed Ecopetrol's Stand-Alone Credit Profile (SACP) at bb+.

In its report, S&P stated that Ecopetrol's global rating was adjusted in line with Colombia's sovereign rating and remains capped by it, due to the Company's significance in national revenue generation, its status as a government-related entity, and its role in the country's energy transition. The negative outlook on Ecopetrol reflects the sovereign's outlook.

Regarding the stand-alone rating, the agency expects Ecopetrol to maintain its leverage ratio (debt/EBITDA) between 2.0x and 2.5x, with an EBITDA margin close to 40%. S&P also positively highlighted the Company's 2040 strategy, which focuses on growth prospects, reserve replacement, high operational availability of refineries, and strengthening the investment portfolio through business diversification.

The full report issued by the agency on June 27, 2025, announcing the rating action, can be accessed in the link below:

https://www.capitaliq.spglobal.com/web/client?auth=inherit#ratingsdirect/creditresearch?artObjectId=101631815

Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent, with more than 19,000 employees. In Colombia, it is responsible for more than 60% of the hydrocarbon production of most transportation, logistics, and hydrocarbon refining systems, and it holds leading positions in the petrochemicals and gas distribution segments. With the acquisition of 51.4% of ISA's shares, the company participates in energy transmission, the management of real-time systems (XM), and the Barranquilla - Cartagena coastal highway concession. At the international level, Ecopetrol has a stake in strategic basins in the American continent, with Drilling and Exploration operations in the United States (Permian basin and the Gulf of Mexico), Brazil, and Mexico, and, through ISA and its subsidiaries, Ecopetrol holds leading positions in the power transmission business in Brazil, Chile, Peru, and Bolivia, road concessions in Chile, and the telecommunications sector.

This release contains statements that may be considered forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All forward-looking statements, whether made in this release or in future filings or press releases, or orally, address matters that involve risks and uncertainties, including in respect of the Company's prospects for growth and its ongoing access to capital to fund the Company's business plan, among others. Consequently, changes in the following factors, among others, could cause actual results to differ materially from those included in the forward-looking statements: market prices of oil & gas, our exploration, and production activities, market conditions, applicable regulations, the exchange rate, the Company's competitiveness and the performance of Colombia's economy and industry, to mention a few. We do not intend and do not assume any obligation to update these forward-looking statements. 

For more information, please contact:

Head of Capital Markets
Carolina Tovar Aragón
Email: investors@ecopetrol.com.co 

Head of Corporate Communications (Colombia)
Marcela Ulloa
Email: marcela.ulloa@ecopetrol.com.co

View original content:https://www.prnewswire.com/news-releases/sp-global-ratings-affirms-ecopetrols-stand-alone-credit-profile-sacp-while-adjusting-its-global-credit-rating-302493749.html

SOURCE Ecopetrol S.A.

FAQ

What is Ecopetrol's new credit rating from S&P Global Ratings in 2025?

S&P Global Ratings downgraded Ecopetrol's global credit rating from BB+ to BB on June 27, 2025, while maintaining a negative outlook.

Why was Ecopetrol's (EC) credit rating downgraded in 2025?

The downgrade was primarily due to the reduction in Colombia's sovereign rating on June 26, 2025, as Ecopetrol's rating is capped by the sovereign rating due to its status as a government-related entity.

What is Ecopetrol's expected EBITDA margin and leverage ratio for 2025?

S&P expects Ecopetrol to maintain an EBITDA margin close to 40% and a leverage ratio (debt/EBITDA) between 2.0x and 2.5x.

What is Ecopetrol's Stand-Alone Credit Profile (SACP) rating in 2025?

S&P Global Ratings affirmed Ecopetrol's Stand-Alone Credit Profile (SACP) at bb+.

What are the key elements of Ecopetrol's 2040 strategy highlighted by S&P?

S&P highlighted Ecopetrol's focus on growth prospects, reserve replacement, high operational availability of refineries, and strengthening the investment portfolio through business diversification.