Energy -- Oil and Gas, Exploration and Production
The Colombian Quarterly
Q3/09 – Positive momentum continues
In this report we provide political, economic and industry news and data points on the
investment environment in Colombia.
Summary
Colombian-based exploration and production companies followed up a very good Q2/09
with a strong Q3/09. Average share prices rose 22% in the quarter, compared with 25%
in Q2/09 (with notable positive and negative outliers). This was better than the 12.3%
increase in the Colombian Stock Exchange during the quarter and compares with a 26%
increase in the Canaccord Adams International Index. While the gains in Q2/09 can be
primarily attributed to the significant 44% run-up in crude oil prices, oil remained fairly
flat during Q3/09 but equities continued to gain. While we stop short of saying that world
economies are in the clear, Q3/09 did prove that investors were more willing to conduct
business with the bearish “end of the world” outlook taking a backseat to a more bullish
“on the road to recovery” attitude. Notable but unrelated was the continued growth in
Colombia’s crude oil production, which was up again, to 679,000 bbl/d in September.
Further production increases are expected by year-end as production growth at the
Rubiales oil field is a major contributor to Colombia’s overall production levels.
Similar to Q2/09, the political scene continues to take the spotlight in Colombia.
President Uribe is currently ineligible to run for a third term in the 2010 presidential
election, however he is one step closer to eligibility after Congress passed a bill calling
for a referendum on an amendment to the constitution that would allow him to run for
a third term. The issue now rests with Colombia’s Constitutional Court, which will
decide whether to proceed with a referendum. As part and parcel of this story, the issue
of corruption was front and centre during Q3/09, including the investigation of
government officials such as mayors and governors and a number of high-profile
allegations. We still expect this to be the most watched story in South American and
Colombian politics throughout the remainder of 2009 and into 2010.