Breaking Down Ecopetrol S.A. (EC) Financial Health: Key Insights for Investors

You're looking at Ecopetrol S.A. (EC) and seeing a major Latin American energy player, but the headline numbers from the 2025 fiscal year paint a mixed, complex picture that demands a closer look. The company's operational discipline is defintely strong, evidenced by a Q3 EBITDA margin of 41% on COP 12.3 trillion, which shows they are managing costs well, but you can't ignore the top-line pressure: revenue fell to COP 29,840 billion in the third quarter, a clear signal of the nearly 15% decline in Brent crude prices year-to-date. So, while the year-to-date investment of nearly $4.2 billion is on track for their $6.3 billion annual target to drive energy transition, the underlying financial health shows a potential risk, with an Altman Z-Score sitting at 1.15, placing it in a financial 'distress zone.' We need to map out how that strong operational cash flow-like the COP 14.1 trillion cash position-can overcome the structural headwinds and translate into sustainable shareholder value, not just a high dividend yield.

Revenue Analysis

You need to know where Ecopetrol S.A. (EC) makes its money, especially with the recent market volatility. The direct takeaway is that while the core business remains hydrocarbons, revenue is under pressure from lower commodity prices, showing a -7.8% year-over-year decline in the first nine months of 2025.

For the first nine months (9M) of 2025, Ecopetrol S.A. reported total revenues of COP 90.9 trillion. This financial performance reflects the dual challenge of declining sales volume and lower crude oil prices, but also the stabilizing effect of its diversified business lines, particularly in transmission. The company's revenue streams are complex, but they break down into four main segments, covering the full energy value chain and beyond.

Here's the quick math on the recent trend: Sales revenue for the third quarter (Q3) of 2025 was COP 29.8 trillion, marking a decline of -13.8% compared to Q3 2024. That's a significant drop in a single quarter, so you defintely need to look closer at the drivers. The trailing twelve months (TTM) revenue ending September 30, 2025, stood at COP 125.67 trillion, representing a -5.75% decline year-over-year.

The primary revenue sources for Ecopetrol S.A. are its four core business segments:

• Exploration and Production (E&P): Crude oil and natural gas extraction.
• Refining and Petrochemical: Processing crude into finished products.
• Transport and Logistics: Pipeline and storage services.
• Electric Power Transmission and Toll Roads Concessions: Non-hydrocarbon infrastructure.

The Refining and Petrochemical segment is the single largest contributor to the company's overall revenue. However, when you look at profitability (EBITDA), the picture shifts, showing the value of the upstream and midstream operations. For Q3 2025, the Exploration and Production segment accounted for 53% of EBITDA, while Transportation, Transmission and Toll Road contributed 42%. This shows the E&P and midstream assets are the profit engine, even if refining drives the top-line revenue number.

The -7.8% cumulative revenue decrease for 9M 2025 was primarily due to two factors: a lower weighted average selling price for crude oil and products, which fell by -$6.9 USD/bbl compared to 9M 2024, and a decrease in sales volume. To be fair, this decline was partially offset by a positive COP +2.3 trillion impact from the average exchange rate and a small increase in revenues from their energy and road transmission services. This resilience in the non-hydrocarbon business is a crucial diversification strategy and a key reason to Exploring Ecopetrol S.A. (EC) Investor Profile: Who's Buying and Why?

The major change in the revenue mix is the company's strategic push into non-hydrocarbon areas, like electric power transmission via its investment in Interconexión Eléctrica S.A. (ISA), and the active transition to integrate renewable energy sources. This shift is designed to stabilize cash flow against the volatility of the oil and gas markets. This is a long-term hedge. Here's a summary of the recent quarterly revenue performance:

The decline in revenue is a clear near-term risk, but the strong 41% EBITDA margin in Q3 2025 suggests operational efficiency remains robust, which is what you want to see from a major integrated energy company.

Profitability Metrics

You need a clear picture of Ecopetrol S.A. (EC)'s ability to turn revenue into profit, especially given the market volatility we've seen. The core profitability metrics for the 2025 fiscal year, drawing on the most recent nine-month (9M) data through September 30, 2025, tell a story of cost management offsetting revenue pressure.

The headline is that while the trailing twelve-month (TTM) figures show a significant decline from the 2022-2023 peak, the company's operational efficiency is holding up in a challenging environment. This is defintely a testament to their cost control programs.

• Gross Profit Margin: Measures production efficiency; how much revenue is left after Cost of Goods Sold.
• Operating Margin: Shows core business efficiency; how much revenue is left after all operating expenses.
• Net Profit Margin: The bottom line; how much of every dollar in revenue is kept as profit.

Key Profitability Ratios (2025 Data)

Looking at the most recent figures available, Ecopetrol S.A. shows a solid, albeit compressed, margin profile. For the nine months ending September 30, 2025, the company reported a Net Income of COP 7.5 trillion and an EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of COP 36.7 trillion.

Here's the quick math on the key margins, using the freshest reported figures, including the TTM data ending March 31, 2025, for a more complete picture:

The Gross Margin of 34.83% (calculated from TTM Gross Profit of $49.994B and Revenue of $143.546B through March 31, 2025) is slightly below the industry median, suggesting some pressure on the cost of production and sales.

Still, the Operating Margin of 23.79% is actually ahead of the industry median of 21.4%. This suggests Ecopetrol S.A. is managing its overhead and selling, general, and administrative (SG&A) expenses more efficiently than many peers.

Profitability Trends and Operational Efficiency

The recent trend shows a clear deceleration from the post-pandemic highs. The TTM Net Income of $14.647B as of March 31, 2025, represents a sharp 42.21% decline year-over-year. This is the risk you need to map: lower commodity prices and exchange rate fluctuations are hitting the top and bottom lines.

What this estimate hides is the quarter-to-quarter resilience. The company reported a 42% growth in net income in the third quarter of 2025 compared to the second quarter of 2025. This recovery was driven by two key operational factors:

• Stable operations in the refining segment, which is a crucial diversification point.
• Strict control over operating expenditures (OpEx) and efficiency programs that contributed COP 4.1 trillion in savings by the end of Q3 2025.

This efficiency focus is critical. The integrated gross refining margin, for example, grew by 22% in the nine months of 2025 compared to 2024, showing a strategic focus on maximizing high-value products. Honestly, this ability to pivot and control costs is what separates a good energy company from a great one. You can read more about their long-term strategy in their Mission Statement, Vision, & Core Values of Ecopetrol S.A. (EC).

Debt vs. Equity Structure

When you look at Ecopetrol S.A. (EC)'s balance sheet, the first thing that jumps out is how they finance their massive operations. They are a capital-intensive business, so they defintely use debt to fuel their growth, but you need to see if that debt load is manageable. The quick takeaway is that Ecopetrol S.A. (EC) is significantly more leveraged than most of its integrated oil and gas peers, a risk factor you shouldn't ignore.

As of the end of the second quarter of 2025, Ecopetrol S.A. (EC)'s total debt stood at approximately COP 120.26 trillion. Here's the quick math on how that breaks down: their Long-Term Debt and Capital Lease Obligation was about COP 104.62 trillion, while Short-Term Debt and Capital Lease Obligation was COP 15.64 trillion. This structure shows a heavy reliance on long-term financing, which is typical for a company with multi-decade projects in exploration and infrastructure.

The crucial metric here is the Debt-to-Equity (D/E) ratio, which measures how much of the company's financing comes from debt versus shareholder equity. Ecopetrol S.A. (EC)'s D/E ratio as of June 30, 2025, was approximately 1.52. To be fair, this is high. The average D/E ratio for the integrated oil and gas industry is closer to 0.66 as of November 2025. This means Ecopetrol S.A. (EC) uses almost 1.5 times more debt than equity to finance its assets, which is a significant deviation from the industry benchmark and signals higher financial leverage.

This high leverage is why credit ratings matter so much. In October 2025, Fitch Ratings reaffirmed Ecopetrol S.A. (EC)'s global credit rating at 'BB+' with a Negative Outlook, though its national rating remains a strong 'AAA (col)' with a Stable Outlook. S&P Global Ratings also maintained a 'BB+' rating in June 2025, citing a forecast that the adjusted Gross Debt-to-EBITDA ratio would remain above 2.0 times, which indicates higher-than-expected leverage. The Gross Debt-to-EBITDA ratio was 2.4 times as of September 2025. These ratings reflect the company's strong operational profile, but the negative outlook is a direct result of the high debt load and external factors like commodity prices.

The company is actively balancing its funding mix, though. In July 2025, Ecopetrol S.A. (EC) secured approval to amend its local public bond program to include new instruments like sustainable performance-linked bonds and specific-purpose bonds (green, social, etc.). This is a smart move to diversify capital sources and align with environmental, social, and governance (ESG) trends. Plus, even with high leverage, Ecopetrol S.A. (EC) has maintained a strong cash position of COP 14.1 trillion as of September 2025, and its dividend yield was a compelling 16.91% in April 2025, which is a massive return to equity holders. They are funding growth with debt, but they are also rewarding shareholders handsomely with cash flow.

• Total Debt (Q2 2025): COP 120.26 trillion.
• Debt-to-Equity Ratio (Q2 2025): 1.52.
• Industry Average D/E (Integrated O&G): 0.66.
• Fitch Global Rating (Oct 2025): 'BB+' / Negative Outlook.

For a deeper dive into who is betting on this debt-heavy structure, you should check out Exploring Ecopetrol S.A. (EC) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

When you look at Ecopetrol S.A. (EC), the first thing we need to assess is their ability to cover short-term bills-their liquidity. Honestly, the company has an 'adequate' liquidity profile right now, which is a solid foundation for a major energy player.

The most telling metric here is the Current Ratio, which measures current assets against current liabilities. For Ecopetrol S.A., the Current Ratio stood at 1.45 as of Q2 2025. This means the company holds $1.45 in liquid assets for every $1.00 of debt coming due in the next year. That's defintely a healthy ratio, especially in the capital-intensive energy sector. A Quick Ratio, which strips out inventory (less liquid), would be lower, but the company's strong cash position suggests they can handle immediate obligations without issue.

Here's the quick math on their immediate cash cushion: as of the end of Q2 2025, the Ecopetrol Group held a cash balance of COP 13.1 trillion (Colombian Pesos). That is a significant reserve, and it shows the financial flexibility needed to navigate volatile commodity markets.

Cash Flow: The Engine of Liquidity

A high current ratio is great, but cash flow is the real engine. Ecopetrol S.A.'s cash flow statement for 2025 shows a healthy generation of cash from core operations, which is what you want to see. For the first half of 2025, the company reported a positive Free Cash Flow (FCF) of COP 3.1 trillion. This FCF is the cash left over after paying for operating expenses and capital expenditures (CapEx), and it's a critical source of funding for dividends and debt reduction.

The strong operational cash flow in H1 2025 was boosted significantly by the early collection of the Fuel Price Stabilization Fund (FEPEC), which brought in COP 7.6 trillion. This one-time boost is a good example of how government-related receivables can impact an energy company's near-term liquidity. Still, the company is also investing heavily, with capital expenditures for the first nine months of 2025 (9M 2025) increasing due to higher construction activity.

• Operating Cash Flow: Strong, with a major COP 7.6 trillion boost from FEPEC collection in H1 2025.
• Investing Cash Flow: Outflows increased due to higher capital investments, including a focus on upstream activities.
• Financing Cash Flow: Outflows included the full payment of dividends to shareholders, totaling COP 8.8 trillion in the first half of the year.

Working Capital and Near-Term Risks

Ecopetrol S.A. has been actively focused on optimizing its working capital (current assets minus current liabilities). In 2024, their efficiency programs achieved historic optimizations of COP 5.3 trillion. This focus on efficiency helps keep the Current Ratio strong by managing inventory, receivables, and payables more tightly. It's a smart move in a market where commodity prices can shift fast.

The main liquidity strength is the company's robust cash flow generation and access to both local and international financing. However, the primary risk lies in solvency (long-term debt), which S&P Global Ratings flagged in mid-2025. The gross debt to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) ratio stood at 2.4 times as of June 2025, which is right up against the company's long-term target of 2.5 times. This means most of the liquidity pressure is tied to managing their debt load and large dividend payouts, not a day-to-day inability to pay bills.

For a deeper dive into the company's strategic position, check out our full report on Breaking Down Ecopetrol S.A. (EC) Financial Health: Key Insights for Investors.

Valuation Analysis

Is Ecopetrol S.A. (EC) overvalued or undervalued? Based on a pure multiples analysis using 2025 data, Ecopetrol S.A. appears undervalued relative to its industry peers, but this is tempered by a consensus Hold rating from analysts and concerns over dividend sustainability. Your decision hinges on whether you believe the company can execute its long-term strategy, which you can read more about here: Mission Statement, Vision, & Core Values of Ecopetrol S.A. (EC).

Assessing Value Through Key Multiples

When we look at the core valuation ratios, Ecopetrol S.A. is defintely trading at a discount. The trailing Price-to-Earnings (P/E) ratio, which measures the price you pay for every dollar of earnings, stands at about 7.83 as of November 2025. Here's the quick math: that's significantly lower than the Energy sector's average P/E of around 12.82, suggesting the stock is cheap on earnings.

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio, which is a better measure for capital-intensive companies like Ecopetrol S.A. because it accounts for debt, is also compellingly low at 4.67. This compares favorably to the Oil & Gas industry median of approximately 7.025. Plus, the Price-to-Book (P/B) ratio is only about 0.79. A P/B below 1.0 means the market values the company for less than its net asset value, which is a classic signal of being undervalued.

Near-Term Stock Performance and Analyst View

The stock price trend over the last 12 months shows a volatile but upward trajectory, trading in a range between a 52-week low of $7.41 and a 52-week high of $11.05. As of mid-November 2025, the stock is trading around the $10.12 mark. This range tells you the market is pricing in significant uncertainty.

Despite the low valuation multiples, the analyst community consensus is a cautious Hold. The average 12-month price target is set at $11.75, suggesting an upside potential of roughly 16.2% from the current price. The market is saying, 'It's cheap, but let's wait for clearer growth signals before a strong Buy.'

• Current Price (Nov 2025): $10.12.
• 52-Week Range: $7.41 to $11.05.
• Analyst Consensus: Hold.
• Average Target Price: $11.75.

Dividend Yield and Sustainability Risk

For income-focused investors, Ecopetrol S.A. offers an exceptionally high trailing dividend yield, estimated around 9.80%. That's a huge payout. But, you must look closely at how sustainable that is.

The current dividend payout ratio is high, sitting at a concerning 115.27%. What this estimate hides is that the company is paying out more in dividends than it earns in net income, which simply isn't sustainable long-term without tapping cash reserves or taking on debt. For the coming year, the forecasted payout ratio is still high at about 82.51%. This is a major risk factor you need to weigh against the attractive yield.

Risk Factors

You need to know that Ecopetrol S.A. (EC) faces a tough three-way squeeze: volatile oil prices, significant exchange rate exposure, and increasing governance pressure from its majority shareholder, the Colombian State. The core takeaway is that while the company shows operational resilience-like the 41% EBITDA margin in Q3 2025-its financial and strategic flexibility is under pressure, which is a key risk for investors.

External and Market Volatility

The biggest near-term risk remains the price of crude oil. For 2025, S&P Global Ratings projects Brent crude to average just US$62.5 per barrel, a 26.5% drop from prior levels, which directly impacts Ecopetrol S.A.'s top line. This is already visible: Q3 2025 sales revenue declined by 13.8% to COP29.8 trillion compared to the same period last year. The other major external force is the Colombian Peso (COP) exchange rate. Since most revenues are in U.S. dollars, a strong peso can wipe out profit; the company estimates a potential impact of COP700 billion on net profit for every COP100 variation in the exchange rate.

• Oil price decline is a constant headwind.

Operational and Financial Leverage

The company's debt profile is a clear area of concern. At the close of Q1 2025, the adjusted net debt-to-EBITDA ratio hit 2.4 times, exceeding the internal target of 2.0 times. This elevated leverage, combined with a decline in sales revenue, pushed the company's Altman Z-Score to 1.15 in Q3 2025, placing it in the financial distress zone-a warning sign that requires close monitoring. Operationally, the suspension of gas production in the northern part of the Tibu field shows how local disruptions can immediately affect output.

Here's the quick math on recent performance:

Strategic and Regulatory Challenges

As the Colombian State holds an 88.49% stake, governance risks are significant. S&P Global Ratings flagged this issue in mid-2025, noting that increased government ties on the board reduce the company's autonomy, which is a tangible credit risk. Furthermore, the energy transition presents a long-term strategic threat: the risk of stranded assets (exploration and production assets that become uneconomical) is real as global market preferences shift toward low-carbon products. New regulations, like the National Program for Tradable Emissions Quotas (PNCTE) scheduled to begin in 2025, will also add compliance costs.

Mitigation and Actionable Insights

Ecopetrol S.A. is not standing still. The company has a clear strategy to combat these risks, focusing on capital discipline and efficiency. They have a financial coverage program in place for the exchange rate risk and a robust compliance system. Their efficiency and profitability agenda generated COP4.1 trillion in savings by the end of Q3 2025. Critically, the 2025 investment budget of COP24 to COP28 trillion directs approximately COP2.3 trillion to SosTECnibilidad® projects, aiming to reduce CO2 equivalent emissions by an additional 300,000 tons this year. This shows a commitment to managing the transition risk, which aligns with their broader goals outlined in the Mission Statement, Vision, & Core Values of Ecopetrol S.A. (EC).

Your next step: Review the company's Q4 2025 guidance for the 2026 capital expenditure plan to gauge how strictly they are maintaining capital defintely discipline against the projected challenging price environment.

Growth Opportunities

You're looking for a clear map of Ecopetrol S.A.'s (EC) future, and the picture is one of calculated dual-track growth: maximizing the core oil and gas business while aggressively pivoting into the energy transition. The company's 2025 plan is defintely a balancing act, but it sets clear, measurable targets that drive value.

The core takeaway is this: Ecopetrol S.A. is leaning into its high-margin hydrocarbon base to fund a substantial push into renewables and gas infrastructure, which will be the long-term growth engine. This strategy is backed by a massive capital expenditure (CapEx) budget for 2025 ranging between 24 and 28 trillion pesos (approximately $5.4 billion to $6.4 billion).

Analysis of Key Growth Drivers

The near-term growth is anchored in exploration and production (E&P), which accounts for roughly 76% of the 2025 budget. This is a direct bet on maintaining high production volumes and cash flow. The long-term, transformative growth, however, lies in the energy transition and infrastructure expansion.

• Hydrocarbon Production: The company aims for a profitable production range of 740,000 to 745,000 barrels of oil equivalent per day (boe/day) in 2025. This is supported by drilling 455-465 development wells, with 79% in Colombia and 21% in the U.S..
• Renewable Energy Portfolio: Ecopetrol S.A. is building a significant renewable footprint, with a goal of reaching 900 MW of installed capacity by the end of 2025. This includes the acquisition of a solar project portfolio with 0.6 GW capacity for $157.5 million and the 205 MW Windpeshi wind farm.
• New Gas Hubs and Hydrogen: They are leveraging existing infrastructure to develop a floating storage regasification unit (FSRU) terminal at the Coveñas Maritime Terminal for Liquefied Natural Gas (LNG) imports, positioning it as a new strategic natural gas hub. Plus, they plan to build Latin America's largest green hydrogen plant in Cartagena, producing 800 metric tons/year.
• Infrastructure Expansion: The subsidiary Interconexión Eléctrica S.A E.S.P. (ISA) is set to expand the electric power grid to approximately 50,400 km in operation by 2025, cementing its regional leadership in energy transmission.

Future Revenue and Earnings Estimates

Wall Street analysts are cautious but see growth in earnings, despite some revenue headwinds. The forecast for the company's annual earnings growth rate is around 3.2% per year, with a projected earnings per share (EPS) for the next year (2025/2026) estimated at $1.83. The company is targeting an impressive EBITDA margin of approximately 39% for 2025, assuming a Brent crude price of $73/barrel. Here's the quick math on the earnings growth: a 3.2% annual growth on a company of this scale is a substantial amount of new profit, even if the top-line revenue faces pressure from declining oil prices or government policy changes.

Competitive Advantages and Positioning

Ecopetrol S.A.'s major competitive advantage lies in its vertical integration and its status as Colombia's dominant oil and gas operator, which generates the strong cash flow necessary for its energy transition. This core strength allows it to offer a high dividend yield, which was around 16.91% as of April 2025, a significant draw for income-focused investors. This high yield acts as a floor for the stock price, even when market sentiment is volatile.

The strategic move into green hydrogen and LNG imports, leveraging existing infrastructure like the Coveñas Maritime Terminal, positions Ecopetrol S.A. to become a leader in the new energy landscape across the American continent. What this estimate hides, however, is the execution risk and the political uncertainty that always shadows a state-owned enterprise (SOE). Still, the company is making smart, concrete moves to diversify its revenue streams and reduce its carbon footprint.

To dig deeper into the company's financial resilience and risks, you should review our full analysis at Breaking Down Ecopetrol S.A. (EC) Financial Health: Key Insights for Investors. Your next step should be to model the impact of the new 900 MW renewable capacity on the company's long-term cash flow projections.