Ecopetrol has incorporated two new companies — Ecopetrol Permian and Ecopetrol USA — to develop the JV, and Ecopetrol America Inc. into Ecopetrol America LLC for continuous focus on US GoM operations.
Image: The newly established JV is aimed at developing Occidental's Midland Basin assets. Photo courtesy of skeeze from Pixabay.
Ecopetrol has formed a joint venture (JV) with Occidental Petroleum, a US-based hydrocarbon exploration company, for development of Midland Basin activities in the Permian Basin.
The newly established JV is aimed at increasing Occidental’s Midland Basin assets spreading over 97,000 net acres in the Permian Basin.
It enables Ecopetrol to book ~160MMboe of undeveloped reserves at transaction closing and provides access to one of the most productive resource plays in the world.
Ecopetrol expected to produce approximately 95kboed in the JV
The JV intends to increase production progressively until 2027, when Ecopetrol’s output is predicted to reach around 95kboed.
Ecopetrol is not only expected to receive its share of future production from the development acreage, but also support its employees to the JV, to gain expertise in shale development and help technology and knowledge transfer for its assets in Colombia.
The company said the JV agreement is completely in line with its strategic priorities, which focus on reserves and production growth, under a strict capital deployment discipline.
In addition, it would pay $750m (£618m) in cash and an additional $750m (£618m) of carried capital to acquire a 49% interest in the new venture, while Occidental would own a 51% interest and operate the joint venture. Ecopetrol would pay 75% of Occidental’s share of capital expenditures during the carry period.
Ecopetrol president and CEO Felipe Bayon said: “We are excited to partner with one of the largest operators in the Permian Basin, especially one we have worked successfully with for so many decades.
“This is a key step to enhance our reserve base and production growth whilst we strengthen our capabilities in shale development and bring this technology to Colombia for the economic benefit of the country.”
Credit Suisse served as a financial adviser for Ecopetrol on the transaction, while Shearman & Sterling acted on legal matters, with DeGolyer and McNaughton providing technical advice.