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Ecopetrol and Occidental to develop acreage in Midland Basin

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Oilfield Technology,

Ecopetrol S.A. has formed a joint venture (JV) with Occidental Petroleum Corp. to develop 97 000 net acres of Occidental's Midland Basin properties in the Permian Basin.

The JV enables Ecopetrol to book approximately 160 million boe of proved undeveloped reserves at transaction closing and provides access to one of the most prolific resource plays in the world. The JV will progressively increase production until 2027, when production for Ecopetrol in the JV is estimated to reach circa 95 kboe/d.

In addition to its share of future production from the development acreage, Ecopetrol will second employees to the JV. This will enable Ecopetrol to advance its expertise in shale development and ensure technology and knowledge transfer from the Permian Basin to its assets in Colombia. The deal is fully aligned with Ecopetrol's strategic priorities outlined in the 2019 - 2021 business plan, which focus on reserves and production growth, under a strict capital deployment discipline.

Ecopetrol will pay US$750 million in cash plus US$750 million of carried capital in exchange for a 49% interest in the new venture. Occidental will own a 51% interest and operate the JV. During the carry period, Ecopetrol will pay 75% of Occidental's share of capital expenditures.

The JV allows Occidental to accelerate its development plans in the Midland Basin. Occidental will retain production and cash flow from its existing operations in the Midland Basin.

"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," said Ecopetrol CEO President Felipe Bayon. "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."

The transaction is expected to close around year end.

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